I had a brain wave today.
3/4 of my credit card debts are on 0% interest cards, with a smallish balance left on the remainder.
I also have a £1000 overdraft.
And it gets worse.
I pay interest and bank charges on being in my overdraft (Ok, truth is I live in my overdraft) but whereas on the credit card that charges interest some of the payments I make go on clearing the balance, with the charges I pay for the overdraft absolutely none of it contributes to clearing that debt.
I am paying the bank for being in debt, and the bank gives nothing back.
This is sort of fair, I mean I used the bank’s money to buy things, so why should the bank help me pay that money back, and banks are a business after all.
But it means I am paying a bill that gives me nothing back, I am going nowhere with that debt.
So I have decided that instead of focusing on the 0% cards (for the moment at least) I will be paying £100 towards my overdraft each month that I can so I can clear that debt.
And once it is clear I can then use the money I was paying in charges and in clearing the debt towards the 0% cards.
There are a few methods of clearing debts that experts recommend but it tends to boil down to two, Avalanche and Snowball.
Snowball is where you pay off the debt with the lowest balance first, focusing on one at a time and getting a mood boost when you clear a debt.
Avalanche is where you pay off the debt with the highest interest rate first, which saves you money in the long run.
I spent most of 2016 doing a mixture of Avalanche and a very ineffective method called ‘Shotgun’ (which is where you pay a little bit extra to all your debts) which I didn’t know was a bad move until I learnt about it in Peter Dunn’s book ‘Your Money Life: Your 20’s’ .
In theory Avalanche is the best method, but after reading Peter Dunn’s book I switched to Snowball as I’ll admit it, I’m a sucker for a sense of achievement.
Now I am switching back, just temporarily, to Avalanche.
I have wanted to leave my bank for a very long time and now that I have transferred the credit card debt I had with them to one of the 0% cards, it is just the overdraft I need to clear.
I had a bad moment late last year. I wasn’t sure if just part of my overdraft charged interest or whether it was all of it (once upon a time part of it was interest free), so I went to the bank based at my work to ask.
It was clear that the counter assistant didn’t quite grasp what I was saying and asked a probing question ‘Are you living in your overdraft? Because we can arrange for you to see a financial counsellor’
And I just panicked as this was the bank based at my work, so it wasn’t outside the realms of possibility that someone I worked with would be behind me in the queue, and I thought this was a very personal question (though well meaning).
When I reach a state of anxiety, my boyfriend says it’s like ‘the shutters come down’. Meaning I go into an unreachable place. I panic. I get ‘Fight or Flight’ and mine is always flight. You can try to ask me what’s up and I will just look at you and not speak for a very long time, not because I’m trying to be a dick or because I don’t know what to say, but because a million and one thoughts are going through my head and I have frozen because I’m trying to compute what to do next.
So I basically stammered my way out of there, leaving very swiftly, and I’m pretty sure I stress ate a giant chocolate bar or something (I’m a stress eater, hence me being overweight as I am perpetually stressed by my anxiety)
So ever since then I have been determined to clear it.
Wish me luck.