Pay debts with savings

You find £ 1000 stuck under your shoe, you:

  • Add it to your savings account?
  • Buy premium bonuses?
  • Put it towards your mortgage?
  • Pay off your credit card debt?
  • And the answer is … 4.

As incredible as it feels to be able to deposit money in your savings, you must always pay the debts first.

When we save we are paid interest on the savings, HOWEVER, the interest we pay for the money we have asked for almost always exceeds this.

Some mathematics

If you put those £ 1000 in an ISA in cash that gives you a 2.8% interest, you would do £ 28

BUT if you have a credit card bill of £ 1000 on a 20% interest card, you would lose £ 200

The debt exception

Loans for students: have such low interest that you should not rush to pay it, especially if this means that you may have to borrow more expensive credit later.

The golden rule: you should always pay the debt with the highest interest first. Generally it will be in the following order:

Credit cards:

If you have a 0% credit card period, make sure you are paying enough each month to pay off your debt before the interest starts. If you want to pay in excess, you can contact your card provider and request to increase your direct monthly debit.


If you obtained your loan after February 2011, you can pay in excess of £ 8,000 over a 12-month period without being penalized. Some banks are still trying to catch up with this law, if they try and charge it, they direct it to section 94 of the Consumer Credit Law. You must notify the lender in writing (by email is fine) and then pay more over a period of 28 days from the notification. The same rules apply if you have less than £ 8,000 to pay off your loan and want to pay it off completely.


if you do not have to settle any other more expensive debt, and have some money for emergencies, paying a portion of your mortgage is an option. You should check your contract to make sure your lender is one of the many that allows up to 10% overpayment without fees. Check when your interest is calculated, if it is annual and that date has elapsed, then you should place your money in a high-rate savings account to earn interest on it until the calculation date approaches. And make sure you have the best mortgage offer too; If you can change it, you could cut your interest payments.

Read more: What You Need to Know about Mortgage Interest Rates

Balancing credit transfer cards, overdraft credit cards and consolidating your debt into a loan can help you get back to black, for more tips, see our debt guide.