Advice re clearing my credit card

[thorwald]

Hi all

So I made a silly mistake last year and got myself a credit card. Made the even sillier mistake of racking up money I can’t afford on it, and I’m aware of how stupid that is. However, I’m in a bit of a fix and looking for some smart advice.

I currently have a balance of €2,800 on the card. For the last month or so I’ve only been in a position to pay the minimum payment of €71, however, I can usually put €35 a week to it (I’m paid weekly). The interest is circa €40 pm.

I’m also trying to get my savings up and running. I earn circa €29k a year and have a dependent. I run a car and rent. My outgoings mainly are bills and cost of living/inflation. Ironically, I’m not too with my money, just make silly decisions. I have a car loan also which stands at €9,333 paying €83 a week with the credit union.

My question is this… should I (a) go to the CU and ask for a top up on my car loan (it’s due to be done Nov 2025) and pay off the CC and get rid of it

Or (b) I am due to receive €1,000 bonus at Christmas. A part of me wants to shove that into savings but another part of me is thinking it’ll take a massive chunk off of the card and I just have to suck it up that I lost out on potentially giving myself €1k in savings. Now I suppose for full disclosure, I will probably need to dip into those savings slightly to cover the cost of Christmas.

So what would be the best and quickest way to clear the CC? It might be noted that my rent is going up in January by €150 so id like to get the CC cleared/cleaned up a lot before then.

Thanks in advance!

 

[ckibat]

@thorwald Pay off the card asap by getting a credit union loan, then get rid of the card. Then use your bonus to pay a chunk off the credit union loan.

Credit cards prey on people who have low earnings/aren't good with budgets/are impulsive because it gives them something they can't "normally" afford without significant effort to save.
If you use your bonus to pay off the card, 1. It won't clear it and 2. You'll continue paying huge repayments.

 

[katiemate]

@ckibat This is what I would recommend too. The interest you will pay on your credit card bill will be much greater than the interest you will pay on a CU loan.

And in turn the interest you will pay on the CU loan will be much greater than the amount of interest you will earn on putting that €1k into a savings account.

 

[ongwae]

@ckibat Yep, I agree with this. I think it would be the way forwards.

You wont be debt free, but you'll be paying significantly less overall in paying it back.

 

[taylord95]

@ckibat This is the way

 

[peter1000]

@thorwald First thing you need to do is stop paying that high level of interest. It's killing your ability to repay.

Get an An Post Credit Card. They will give you 0% interest on balance transfers for 12 months. From there you need to repay that balance as quick as possible. Use as much of your December bonus as possible to repay the debt. You will have it well paid off within the year.

Most important part of this plan is that you cut up your old card and close that account immediately. Second most important thing is that you are disciplined and do not add to your balance on the An Post card

There is 0 point in saving when you have a high interest liability. Concentrate on getting rid of the current debt.

 

[orion3003]

@peter1000 No you don't need to pay this off as quick as possible if the interest is 0. You should save into an interest bearing account...and earn interest on the free loan. Then near the end of the 12 months interest free period, use the savings to pay off the card debt.

 

[peter1000]

@orion3003 That's overcomplicating it. You wouldn't generally tell someone to borrow on a zero percent card to put the money on deposit. By the end of the year they'd probably have gained €60 if they did very well and they'd have to pay tax on that

He just needs to get rid of the interest bill and then get rid of the debt as soon as possible. And then make sure the cards are cancelled before there's any more opportunity to spend on them

 

[orion3003]

@peter1000 No it's not. And yes I would suggest people borrow at 0% and earn 4% (eg with trade Republic). It's free money for little work.

The only downside is that people need the discipline not to spend the money.

 

[tiffaniemichele]

@thorwald The debt snowball.

Dave Ramsey

Further visual explanation

 

[ransom56]

@tiffaniemichele Yeah I would start with this tbh. You don’t have to follow it exactly but the first three steps are extremely handy. I’m working on my emergency fund at the minute but I am ready to roll with my calculations for paying down my debt. You’ll be so surprised how much you can tackle by throwing an extra €150-€200 without having to actually do much!

 

[penfire1]

@thorwald Try get a new credit card with a 0% balance transfer(Avant actively advertise this). Then transfer the balance, pay Ur 35pw & lash what u can off of it

 

[eziel]

@thorwald Unfortunately you can't afford to start saving while you have the credit card debt hanging over your head.

While not ideal your best option seems to be the CU top up loan, as you'll be years trying to pay it off at €35 a week with interest etc.

If you do get a top up you need to up the repayment amount and try to keep to the current repayment schedule. This includes using as much of that €1,000 bonus as possible to reduce your loan amount.

If you have the discipline, and I'm sorry to be harsh but it doesn't sound like you do, you could keep the card for emergencies. With the government stamp duty of €30 a year, I'd recommend you getting rid of it before that's due again.

You'll notice that I recommended using as much as possible but not all of the bonus to pay off the loan. This is because you have a dependent and Christmas is just around the corner. Followed pretty quickly by a rent increase.

So I would suggest putting the equivalent of 1 months rent aside for an emergency and if there is anything left do something nice but not expensive for your dependent for Christmas. Then use whatever is left if anything to pay down the loan.

It's not the most mathematically efficient approach as you will have debt for longer but I think it's more realistic for you.

You don't say how much your rent is, but after that child care, bills etc things are probably tight. So don't be to hard on yourself, you made a mistake but you can fix it.

The next time you are feeling like making what might be a bad decision about money try to wait 3 days and see if you still want to do whatever it is. If you do, make a plan for how you can save to do it.

Also if at all possible try to increase your income.