Use your car to pay off your credit card

If like me, you have a car that will fetch several thousand pounds, (in my case £4000) now is the time to convert that car into cash.

Sell it privately for as much as possible. Mine is currently listed in AutoTrader.

Go to your nearest car dealer and buy a similar replacement (or smaller if it suits) to take advantage of the current 0% and low APR credit deals available direct from the car showrooms. The banks are still offering 8-11% which is huge compared to the current interest rate. Take the offers car dealers are using to drive any kind of sale they can. They're desperate to sell so get the most you can from your current car, use the cash to clear or go toward clearing a credit card and get a newer car at a lower APR. Future lenders will also like you more because you have a car purchase and not a credit card debt on your file.

Here's the figures:
Barclaycard balance: £5,000 at 14.9%
Car value £4,300
Minimum I'll take for the car: £4,000 <- remember there's no pressure to sell here, if it doesn't sell, it doesn't matter, maybe next season :)
Nearly new car: £5,000 at 6% (may as well upgrade slightly while I'm at it to get a car with lower miles and therefore a better resale value in a couple of years)

Paying off Barclaycard:
£175 per month = £6213 over 3 years

Paying off car:
£120 per month = £5636 over 4 years

Now I have £55 extra per month to put onto my other credit cards reducing them further.
Other bonuses I've taken:
I picked a Skoda, lower emissions so lower road tax
Lower mileage than current car so better resale value in another couple of years
Slightly later age so also good on resale value
Better fuel economy with the Skoda than my current Toyota so another saving every day
My credit file shows a car purchase and one less credit card debt

Happy saving!

www.CreditCardWinner.co.uk

Cashflow is King

Cashflow is king is an old business adage but one of the most important in running any business. You can have all the quality stock in the world but if you don't have the cash to book a courier to ship that stock it's next to worthless!

The same is true of your debt management. Here's a quick scenario:

I have an overdraft of £10,000 and it's full with 11% interest.

I have a credit card with £12,000 credit limit with a cash rate of 3.9%.

I can transfer the £10,000 from my overdraft to my credit card which is superb, I'm now saving 7.1%.

With my overdraft there was no minimum monthly payment however. I was paying £100 per month into that overdraft to make enough room for the interest (£300 per quarter) which I could manage.

With the credit card however my minimum payment is 3.5% per month which translates to £455 per month. While I may be saving a fortune in interest, the monthly bill quickly becomes astronomical.

What to do?

Transfer the £10,000 onto the credit card, pay as much as you can afford onto the card each month, for example £200 and pay the balance (£255) out of the overdraft. The interest is calculated daily and applied monthly on both accounts so the longer you can keep the money on the credit card at the lower rate the better.

This way you can save money with the lower interest and still manage the monthly bill. Once the credit card is cleared I'll withdraw the equivalent remaining balance of the overdraft off the card and start over again.

www.CreditCardWinner.co.uk

Is the best really the best?

This is a core principal of Credit Card Winner - do your own homework!

USwitch have announced their '2008 Credit Card Customer Satisfaction Survey' with American Express the winners. Which is lovely if you want great customer service. On the other hand you have to pay for it...

Purchase Rate: 18.9%

(Some versions of American Express offer 15.9% but it's only for 3 months)

Balance Transfers: 18.9%

Cash Withdrawal: 27.9%

This is expensive by anyone's standards, so be careful what you read and always read the 'terms and conditions' before you apply.

Regardless of how nice the staff are, if you're having problems with your finances they'll be just as hard as the next credit card provider to ensure they protect their profits. Go for the best deal that suits you, not the lender.

www.CreditCardWinner.co.uk

Are you saving up to pay off your credit cards???

I had never considered this idea as it simply doesn't make any sense to me. I recently read that many people had their savings locked by the collapse of some banks and suggested their money had been saved up to pay off a credit card among other things.

Quite simply put, unless you're getting a better savings interest rate than the rate you're paying on your credit card then those savings are costing you money.

Interest rates on credit cards are calculated daily and applied monthly.

Savings interest rates are usually calculated monthly or even annually and applied monthly or annually so this is another delay to ensure the credit card debt rises above your savings.

The best policy is to pay as much as you can as quickly as you can onto the credit cards. When your salary or pay arrives, pay the credit cards before adding a penny to your savings.

"But what if I need the money on a rainy day?" I hear you ask. If you're in credit card debt it's already raining. Starting making a break in the clouds with your savings, the empty credit cards can be used for the rainy day and you'll have control over them.

www.CreditCardWinner.co.uk

Making money from cards

There's lots of ways to make money from credit cards, some of which I've mentioned on my website but the idea of using a credit card for a house deposit is either shunned or simply ignored by many people but let's look at some of the advantages...

It's perceived as expensive over a regular loan...
Using the right credit card you can pay below 10% interest. With introductory offers you can pay 0%.

Use a cashback credit card to get a discount. There are usually limits but even 4% on up to £5000 is a couple of hundred pounds off a small deposit.

If you're buying to let then the deposit will be paid for by the tenant anyway along with the mortgage so you've nothing to worry about there, especially with rent insurance in place.

Use two cards, withdraw the deposit on one card then transfer the balance to another. This gives you balance transfer rates for long periods or even life depending on the credit card.

Here's an example:
£10,000 deposit on an Amex card with 4% cashback up to £5000 = £200 discount.

Transfer £9,800 onto Barclaycard at 6.9% for the life of the balance OR
transfer £9.800 onto Virgin card at 3.5% for 9 months. After 9 months transfer the remaining balance to the Barclaycard.
Repeat.

Do this often enough or with lower deposit for low value buy-to-let properties and you have the potential for a quickly growing property portfolio.

Check out Ajay Ahuja's page for more ideas on building a property portfolio.

www.CreditCardWinner.co.uk

Is paying your phone bill late reducing your credit limit?

If like me you've ever missed a payment on a credit card or loan then possibly like me you assumed that you will have damaged your credit rating slightly.

Did you ever consider that a late payment on ANY product which affects your credit file will impact your credit rating, and consequently your credit cards?

This seemed a bit unfair to me but I thought I'd check it out in the small print...
This is the terminology according to Mint (Royal Bank of Scotland):

#######
1 The card
(d) If we have a good reason (for example, if you break this agreement or there is suspected fraud involving the card, PIN or password or if there is a change in how you operate the account or in your financial circumstances, giving us reasonable grounds to believe that you may have difficulty in meeting your commitments) and we consider it reasonably necessary, we may (i) suspend, withdraw or restrict the use of the card, PIN and password and / or (ii) reduce the credit limit and advance limit at any time. We will tell you before we take this action, or as soon as possible afterwards.
#######

So in simple terms, if there is any movement on your credit file which they don't like then they are perfectly free to restrict your credit or cancel it completely and tell you about it later.

Interestingly they don't explain what they consider "a change... in your financial circumstances".

Something to bare in mind the next time you make a late payment while waiting for a balance transfer!

www.CreditCardWinner.co.uk

Is this the worst credit card on the market?

There are lots of reasons for declaring a credit card 'the worst', for example repayment terms or charges only declared in the small print but in the case we're going for the simple APR:

The Vanquis Visa Card
Issuing bank: Vanquis

This card is aimed specifically at people with a poor credit rating who cannot get acceptance for any other cards.

Annual rate: 39.94% p.a. (variable - up to 59.9%)
Cash rate: 49.9% p.a. (variable - up to 59.9%)
Cashback and rewards: none
Minimum monthly payment: 5%
Late payment: £12
Over limit payment: £12
Available credit limit: Minimum £250, maximum £1,000

As a quick example, if you spend £500 on this card then don't make the repayment within 56 days (the interest free period), you will be charged 39.9% (at best) interest.

That makes the interest due in month two: £16.63
The minimum payment is 5% or £5 (whichever is greater): £17

Making the minimum payment each month will take you 9.75 YEARS to clear the card.
Total interest repaid: £1,482.38

Calculations were made using the CreditorWeb calculator and are a guideline only.

www.CreditCardWinner.co.uk