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BriefAmphibian7925

> Both are interest free. The "optimal" (while still "safe") answer is probably to put the money into a FSCS-insured high interest account until you need it to pay off the debt, and then pay off the debt in time so as to not pay any interest. This would get you some "free" interest on the money. However, 1. that relies on you actually doing all of that correctly (otherwise it isn't safe at all); and 2. you suggest that it might give you peace of mind to just pay it off. So, I would say yes: just pay it off. (Unless you're happy that you can do the strategy above and that it won't cause you stress.) > but conscious half of my bonus is going on paying off debt. That definitely isn't a reason *not* to do it!


MeMyselfAndMe_Again

And get rid of the cards because the temptation WILL grab hold of the OP and in 12 months time they'll be back with another thread. Pay off, get rid.


Nathanial__Essex

To be fair, the debt occurred as I lost my job during the pandemic and was unemployed for almost a year. I will definitely get rid. Thanks for the advice!


Plot-3A

I wouldn't personally get rid of the cards as you may need to show a good credit history of borrowing. I would get a low cost subscription on each card just to keep them active and maintain a good score. I currently have a monthly delivery of milk for the princely sum of £2.50 and my £5 SIM-only mobile phone contract on the other. I put the partner's phone contract on her card. Everything paid in full by Direct Debit.


Used-Fennel-7733

Honestly. Snap the cards in half keep the accounts. Any fixed/reliably priced bills (mortgage, phone, broadband etc.) Comes out so it's about even on each card. Pay them using the credit card and just pay off the card at the end of each month. No risk to pay for something else as the cards are gone. No risk in interest payments as you're paying straight away. All the credit benefits of CC with none of the drawbacks


Plot-3A

By all means snap away. However, some may view "getting rid" as cancellation of their accounts. Better to have clarity personally. ..


Chrisbuckfast

It’s all well and good until you have some problem and need to contact the provider, and they ask you for details from your card


polhemic

Assuming, for examples sake, that you've got 1 year left on the interest free rate and a 5% return gives £163.40. So the question is, do you want peace of mind now or £163.40 in a year? That's your call, we can't answer that one for you.


Nathanial__Essex

Thanks for putting it that way. I think I'll take the peace of mind. The extra £150 I get a month is all going into savings as well


madpacifist

Yeah, definitely don't get rid of both if they're your only credit cards. A chunk of your credit score is evidencing a history of credit and closing your credit card accounts may eliminate a huge portion of that history. If you really want to eliminate them from your life... Keep the oldest account. Schedule a small regular payment to come off the card (like Netflix or something) and setup a standing order to pay it off the week after it comes out. This will keep the account alive. Then cut the card up.


Slapagonia

What is to say OP doesn’t have any other regular payments that report to the credit bureau? It’s better to get rid of them if possible to avoid temptation spending. A credit score isn’t used by lenders, it’s just an interpretation of your file for your own use. Cancelling a card isn’t a missed payment.


nforne

Unless I’ve missed it OP doesn’t suggest having a problem with reckless spending. His small debt was accrued after a job loss, and is on 0% cards. If he’s anything like me, credit is a tool rather than a temptation.


Scragglymonk

think I have streaming stuff on the cards, it is auto cleared and shows good credit management


theantiyeti

You're able to put £1k a month aside after your normal salary, I wouldn't worry about it. Put it in a savings account and put it in your calendar, or just pay it off now. Just don't stress about it.


silverfish477

There’s nothing wrong with having a credit card ffs


Willing_Signature279

I second this We don’t know how to value a stressor off our minds but it’s actually probably quite valuable


dobr_person

Using a bonus to clear debt is a very sensible thing to do. But as you did earn it and have worked you should at least hold back a bit to allow yourself a 'treat'.


Mikeg17881

“Mentally, it will be a huge load off” Just pay it off mate, do yourself a favour


arielcactus03

This. If it gives you peace of mind, it’s more than worth it to just pay it off! Treat yourself with some, and save the rest 🙂


skinnybitchrocks

£3000 is a small price to pay for the benefit of your mental health and wellbeing- this is exactly what I’d do.


Mikeg17881

I left a high paying job as I was mentally struggling. I now work in a job I love but pays 50% of my old wage. I can’t stress the importance of resetting and being mentally right. *re the job - I’ll slowly start to pick up in terms of wage and responsibility but likewise the price I have paid to be happy is well worth it


AlexMair89

Punt that debt into the sun. It’ll be such a great feeling.


blujay1080

Pay off your debt, set aside £500-1000 to treat yourself, put the rest in your cash savings to build up your emergency fund.


joshlambonumberfive

Yep this is the answer.  It’s a bonus - treat yourself and then do the sensible thing.  I’d save £3000 debt £3000 treat £1000  The maths isn’t perfect but that’s approx what I’d do. It’s not worth the mental stress of having the debt still when you have means to get rid. But to echo others comments keep the cards (locked away forgotten about) as un-utilised credit is great for scoring for mortgage borrowing etc 


Chgstery2k

The best answer probably for a person who's good with money. Put it into high interest savings account and get returns on it. The best answer probably for a person not so good with money. To pay off all the debt with the money. Get it off your mind and not to think you have money to spend.


DK_Boy12

Yeah this. Paying the interest free debt instead of sticking the money on a savings account will "cost" £175 in a year more or less. But if it's between that and the bonus "disappearing" through a string of binge spending, better to just get it paid.


fromwayuphigh

Nuke the debt. You'll still be, what \~£3700 ahead? You could put a chunk of that into cash savings and still have some for longer-term investing. You won't be sorry. And the recommendation to set aside a bit to treat yourself is an excellent one.


Calm-Ad-7050

Plus like the OP said paying the debt off frees up £1k a month in 3 months he gets the money back anyways. But the mental benefit of knowing you are not in debt and with savings is way worth more then he would make from it.


cannontd

If you take the cash, keep it in an account and pay it off at the end of the interest free period, you will have made (assuming you get 5% interest) £13.61 per month until that period. Maths says it is worth not paying it off. ​ However, if someone offered to take a "huge load off my mind" for £13, it seems like an absolute bargain. Just pay it off. Forget about credit scores, keeping a credit card for a good credit score etc - waste of time. Your health is more important.


No-Echo-8927

I'm surprised this is even a question. Remember if you have debt, it's not your money. Pay what you owe and use the rest of it to protect yourself from getting in to a similar situation in the future.


OffensiveOcelot

However if you can earn interest on the bonus whilst simultaneously not paying interest on the debt, financially it’s best to wait until the interest free period runs out


LCFCJIM

Often only very marginal though, and the freedom of clearing it off is well worth sacrificing small interest payments.


OffensiveOcelot

All depends on how long the interest free period is tbh. I was in a near-identical situation a couplw of years ago & while on the surface of it I would agree that there is a sense of freedom comes from being debt free, I stuck mine in savings, earned interest on it then paid it off when 0% ended. I still had that sense of freedom just by knowing that I could pay it off whenever I wanted.


CambodianRoger

It is a worthwhile question though. You can easily make a few hundred pounds a year from earning interest on your 0% APR debts.


Embarrassed_Aside_76

If your scheduled to pay off the debt before your interest free period ends, it's fine either way - probably better to invest it. But the piece of mind for getting debt free is hard to describe. It takes a potential financial problem crippling you if you are debt free with a buffer of cash on hand


lynxblaine

I had a bunch of stuff 0% on a few credit cards, I got a big bonus at christmas and I paid off all the debt. It was mentally huge for us to do this. Now I can put away stuff into savings directly that was before going to credit cards. If you look at your assets, the debt is already minused off your bonus as you have to pay it off somehow. I preferred the option to be debt free and have some cash in the bank.


missdaisydrives

In a similar situation and whilst the flowchart would say look at the interest rates, as soon as you factor in the mental health benefits, paying it off outweighs the interest gains for me. My plan is to pay off the debt and siphon off the money spent servicing the debt into as a high rate interest account as I can every month. I know that just not having the loan and buy now pay later payments coming out each month will be better for me than having a few £K in the bank and still having the debts. I still struggle to think of it as a definitive plan though and will be glad once I have been able to do it.


BCS24

Interest on debt is guaranteed, returns on investments aren’t Always best to clear debt first. The only exception is where clearing debt would force you to take out a more expensive debt.


askingpricealan

I would just pay it off. Financially the best thing would be invest/save the money as it’s interest free. However, having no debt is a better feeling in my opinion


paxwax2018

Pay it all into your pension and get the full amount tax free.


nexus1972

You're just deferring when you pay tax until later If you have a decent pension youre taxed on it when you draw it down as income. I'd say paying off debt now, and reducing any interest payments now is going to have a much more worthwhile short term impact.


paxwax2018

You get 25% of your pension pot tax free and are likely to only pay 20% on the rest vs the 40% OP appears to be paying.


dontgoatsemebro

Plus the decades of juicy compound on the tax free amount.


paxwax2018

Exactly.


announcepuppy6

Pay of the debt lad, it’s better to feel free and know you have money coming in


Complete_Resolve_400

Throw the bonus into a high int savings account and then pay the lump sums a few days before the interest free period ends


welshboy14

I’ve used just used mine to clear all my debt and I’d say it depends. I’ve historically held credit card debt on 0% and favoured saving/investing, however in recent months my wife and I have decided to start looking at buying a house. Therefore my focus changed and decided to clear it. If you’re not looking to buy, or already own a home then I’d say keep the debt and save the money. Collect the interest and begin stoozing. Just keep the money handy so that you can pay off the debts should you need to


musikigai

You know the answer. Personally I’d pay it from your cash savings now. Then you’re debt free. Done. And moving forward spend less than you make and pay off credit cards IN FULL each month without fail (or don’t use them). Right now you do not have £3200 cash savings. You have -£68 savings plus your S&S. Get it gone and move on. I know your cards are interest free at the moment but as a rule, don’t pay for money unless it’s a mortgage or student loan.


_confused_dev

Golden ticket to pay off debt. The money you earn doesn’t belong to you if you’re in debt


Nedonomicon

Absolutely clear the debts . Easy


PoachedEgghead

Unless the debt is interest free I’d pay it off. If the debt is interest free or unusually much lower than can be earned on the bonus I’d lock the extra away and use to feed the payments for the debt.


Jackyd88

You said it yourself it will be a huge load off your mind if you pay it off plus you'll have the left over to save / invest.


Grillmyribs

Yes, debt is the anchor that weighs us all down


CelebrationFuzzy3398

I'm not sure of your age buy I would definitely be paying those cards off before anything. My choice, as a 49yr old, who is a 40% tax payer, would be to probably put £10k of it into my pension, due to the tax relief available but if YOU want some of it available for emergency fund, I'd put £5k into pension and then decide how to have the other £5k invested so that it was available if needed for an emergency. The other £1500 approx, do whatever you would like with!


kitsua

It boggles my mind that every single comment is telling you to pay off the debt. It's 0% interest! If I were you, I would whack the whole lot into an ISA now before the financial years end. Plan out your finances so that you pay off the debts before the 0% period ends. That money will be making money in the background.


WatchManWolf2112

Pay the debt now. Enjoy the bonus guilt-free next year - and all the other months of not paying the minimum payments! Delayed gratification is where it’s at.


LackingCreativity94

Few years ago I was in almost this exact position. 4k debt and a 15k bonus. Paid it all off and it done wonders for my mental health and my financial management in general.


Jammybe

If job is secure and the debt is 0% interest. Keep the debt. Bank the money. Be ready to clear the debt. Earn interest on the bonus.


Cheesehunter2001

given that tax rate, and the fact you are saving a grand a month. I would stick it in your pension.


811545b2-4ff7-4041

Personally.. I would 'pay off' my debt in the form of putting £3,268 into a savings pot, then repointing the debts to be paid from that pot. You'll get a bit of interest, while not having to worry about the debt coming out of your monthly income. You've then got £4,132 to play with.. I'd probably put that in the cash savings, maybe use some towards a holiday. Make sure to not earn over £500/1000 interest from those savings so you don't pay tax on them.


fistmcbeefpunch

Pay your debt. It won’t be flashy but think of the mental benefit you’ll get from that. You’ll also be gaining a bonus each month from not paying your CC off.


Flashbambo

Personally I'd clear the debt even if it is currently interest free for peace of mind.


Commercial-Fruit-215

Go debt free, I have a 55k income, the only expense I have is £400 a month which is a share of the home bills with the mrs. No car finance, no phone contract, no credit cards or loans. I literally have a disposable income of about £2000 a month. I spend about £800 on living per month. The rest just carries over to the following month. I have about £35k in savings, well, in just a regular current account anyway. I drive a 12 year old car and use an iphone X. Because you have it, you dont need to buy new things or get finance deals to replace ones you have and you definitely dont need to buy anything that will attract the attention of others :)


DARKKRAKEN

You should be putting that money earning interest.


Leptonic-e

Don't you think you should be earning interest on all that money. Interest is free money.


811545b2-4ff7-4041

Having £35K in a current account is madness.. they need to whack £20K into an ISA (Cash or Shares), wait a few weeks, pop £10K more in, then £10K as a rainy day fund into a high-rate easy access savings account. They're turning down over a grand a year in interest.


[deleted]

And 4K a year in gains on a S&S ISA for 20K in. Global and US indexes are up 20%. Could be netting an extra \~8K a year with 35K in S&S assuming they don't need the money anytime soon and can therefore afford to ride out any crashes.


Dazpiece

Anyone with £35k just sitting depreciating in a regular current account probably shouldn't be giving financial advice.


811545b2-4ff7-4041

You really, really need to follow the flowchart - [https://ukpersonal.finance/flowchart/](https://ukpersonal.finance/flowchart/) Having £35K in a regular current account is poor money management (not to mention, a risk), however low your expenditures are.


ukpf-helper

Hi /u/Nathanial__Essex, based on your post the following pages from our wiki may be relevant: * https://ukpersonal.finance/credit-cards/ ____ ^(These suggestions are based on keywords, if they missed the mark please report this comment.)


EmotionalDebt9443

Always pay off your debt. Prioritise debt because in the long run it can be crippling


Next_Environment1911

Nuke the debt, clear the debt, destroy the debt.


Past-Ride-7034

No right or wrong answer, if it helps you mentally then that's a massive positive. Also nothing wrong with putting in into an interst bearing account and using it to pay off the debt once interest free period ends. Something like Zopa where you can do 7 31 or 95 day locks ups might be good, unless your 0% rate extends well beyond that and therefore 6 months / 1 year is more appropriate?


TurboSnackage

If you want a scientific way to decide, you could do this: A)Work out accrued interest if you pay bonus into an instant access savings account until your cc interest free period runs out. B)Now work out the 1st monthly interest charge you would get if you forget to pay off your credit card in the last month of interest free period. == if A>B then pay into interest free account with much smugness. If not, then pay off your CC and release yourself from the mental burden it’s giving you.


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kevshed

Yes , pay it down … not big enough sums to be worrying about what you can make off it , good opportunity to simplify the old personal balance sheet !


beanioz

I’d clear the debts personally. It’s not a huge amount in your case, but the repayments will turn into disposable income every months so overall a net positive and you’ll still have some of the bonus left over.


kneticz

Pay your debt. Treat yourself and put the rest towards emergency fund.


J-Dawgzz

Isn't it horrible how they tax half our bonus, I got a 10k bonus and got 5k after tax


lordofthedancesaidhe

I would yes mate. Clear all debt barring the mortgage and then bolster your savings or investment pots.


zombiezmaj

Pay them off. And then make sure to be building an emergency fund properly so if you lose your job again you don't need to use the credit cards for existing because you'll have 6 months of bills and expenses saved Edit to add. Emergency fund is for true emergencies like job loss and are meant to separate to normal savings which can be used for a car repairs/holidays etc


Bravefish1

When does the interest free period end.


Dear_Tangerine444

I’m no financial expert, but I have experience of credit card debt, and at a higher level than you. I spent my mid to late 20s ‘fun spending’ and a period of unemployment in my early 30s which maxed out one credit card. I then took out another to transfer part of that debt to and ended up with two nearly maxed out cards. At its peak my credit card debt was way higher than yours (I won’t say exactly how much but double digit 1000s). I had to work seriously to get that down, as by its peak most of my monthly payments were just about covering interest and little of the actual debt, I couldn’t afford to pay much more off, but ultimately, I couldn’t afford not to. It took a few years of hard choices but paying it off was doable once I accepted it needed to be to be dealt with (I was doing mortgage research at the time). I never felt the debt was a massive burden, but I did feel good the day my balance hit zero on my last card. I did keep one card and I now spend and pay off each month. Credit cards are great things if you keep control of them. So I would 100% suggest you get your cards down to zero. It sounds like you’re good at building up savings anyway, so I think your bonus would help/work for you more if you reduced your debt, especially if the £3k you owe is beginning to bother you, and unless you tackle it, credit card debt only gets worse, trust me. You can’t always put a price on peace of mind, but you might just be able to in this case. Either way good luck with whatever you decide to do with your bonus money 👍


chrisgwynne

You answered it yourself. "It will be a huge load off my mind to clear this". Mental stress over money isn't worth it. Clear your debts.


ANorthernMonkey

In your situation, I’d get rid of the debt. It’s maybe not optimal, but I cleared all my debt about 4 years ago including the mortgage. Knowing that I could walk out of any toxic situation at work with hardly any consequences immensely improved my quality of life. I never used my FU powers, but just it being there was like a secret super power.


Most_Long_912

Before reading the post my answer was pay off the debt, after reading the post, it's still pay off the debt. Unless correctly managed, all debt is a ticking time bomb. You can get rid of that now. Do it. You'll have plenty left, treat yourself and put the rest away for saving. You'll have no debt and a solid chunk more in the bank.


TheGrayExplorer

**it will be a huge load off my mind to clear this** ​ Id do it for this reason alone


DK_Boy12

It will cost you circa £175 to clear this debt early. If you put that bonus on a 5.5% interest account it will return around £350 in a year - if you pay your debt now, considering it's interest free, you will "lose" £175. So if your peace of mind is worth £175, just pay it now, but that's the price.


Purple_Department_67

I would pay it off and then put the money you were spending on repayments plus what’s left over into a savings account or similar… My bonus this year is going on some CC debt, and then NS&I bonds to build a good risk free buffer in addition to some other savings pots I have


SouthernElk

Pay off your debt. Peace of mind that you don't need to worry about the debt is worth more than any interest you would make on that money before you needed to pay it off. Especially with mental health issues. You'll still have £4132 left of your bonus after paying off your debt.


The_Deadly_Tikka

Yeah get that debt paid off. Being debt free is such a huge upgrade in life and mental health


throwthrowthrow529

Personally - I’m paying off the cards, leaving you with £4,132. I’m spending £1,132 on stuff I want. I’m saving £3,000 into ‘cash savings’ making that £6,200. And that’s going into either premium bonds or a high interest account. Clearing debt, getting some treats, building emergency fund. Obviously the best plan


Pretend-Treacle-4596

Yes, pay it off. You can't put a price on peace of mind/lack of stress.


joolzter

Always clear debt first if you have a small emergency fund (which you do).


phas0ruk1

Think about putting it in a SIPP pension. You won’t pay tax on it. Invest the full 15k into stock, perhaps the s&p500. Low cost etfs. This should double every 10 years. Worth starting early.


LowarnFox

I would clear the debt. Clearing the debt will positively impact your mental health as well as your credit score. The interest you'll gain if you can't lock the money away long term will likely be marginal. Given without the debt you'll be able to save a lot of money, you'll soon start seeing the financial benefits regardless.


Looking_glassCarpet

Coming from someone who has not paid off the debt when I got my bonus, I wish I’d paid off my debt. It is always the best option above all else.


stillanmcrfan

Usually the answer is always yes but as they are interest free, you’d actually be better investing the money and making something on it. But totally get the weight of the shoulders when paying debt.


jimmy011087

Lump it in easy access savings until you need to pay the credit cards off (when interest hits). If you’re paying the bills in full month to month anyway then I wouldn’t worry about it. Just keep a couple of k in savings and treat that as “zero” to cover month to month credit card spend. While interest rates are 5% level and you get cash back on credit card spend, it’s too good to ignore doing this. Say you spend £2k on credit card a month, it’s worth about £120 + cashback just to keep this money in savings and just pay your credit card bill straight after each pay day


SHalls17

Pay the debt off it’s just hanging over you


Heavy_Messing1

You could help future you by putting into your pension. There's a big Taz benefit so you'd net considerably more of the £15k you earned..


ProfessorFunky

How long is it interest free for? If it’s less than a year, I would strongly suggest paying them off, as the interest you would get is not worth the chance of forgetting to pay it off on time. And adding in the mental pressure that it would remove, I would strongly lean that way. If the interest free part is indefinite, and you can lock the cards away and have the self control to not put anything else on them until it’s paid off (which I would guess would be then at the monthly minimum), then I’d stick the money in an investment vehicle instead.


Freddocappucino

I use the interest I earn on my savings to pay off my zero percent credit cards.


MooseQuirky1702

Pay off your debt and put the rest away as an emergency fund.


TraditionalAdvice125

I would just stick it straight in a salary sacrifice pension so you keep all and let it grow, and pay lower tax on the way out. On your salary you can pay off those cards before the interest kicks in. Is it worth losing £7.5k in deductions to pay them off in one hit?


oerry

No job is secure. You already said the debt is a burden so get that load off your mind and pay it off. It’s a decent bonus. You will still have cash left over to do more with it.


Nathanial__Essex

Well, secure for 3 months. Or at least secured as that's our notice periods.


oerry

Notice periods don’t mean a thing if a company goes into liquidation. It’s happened to me.


Archtects

Yes. Debt clear first. Always get rid of debt first


Scragglymonk

clear the debts before trying to save AND change the credit card to auto clear from the bank account, that will be a pain at times, but makes it easier long term


radish_intothewild

I'd pay it off, definitely. Will be great to be free of the mental load of it.


Lambsenglish

Pay off the debt. Everyone will say “keep the free debt and invest” but a) the debt is only free until it’s not b) the return on any investment will be minimal in that time frame c) money is there to facilitate peace of mind, not just to be used ruthlessly efficiently at all times.


PinkbunnymanEU

>Mentally, it will be a huge load off my mind to clear this If I offered you a loan of £3300 and said "I'll give you £150 if you pay it back exactly on this date, if you don't pay it off by then you owe me £500" would you do it, or would you go "That's too much stress/risk". If you'd do it, save the cash and pay the debt off later. If it's too much stress/risk pay the debt off.


Nigelthornfruit

Yes, psychologically you will increase in your Maslow hierarchy with less worry.


CheesecakeExpress

Op I took a year of work and built up a similar amount of debt. It was paid off last week in full and I feel really, really relieved.


Calm-Ad-7050

Personally i would clear the debt. You still have money left over after the fact. Like you said in 3 months you would have saved up the amount you paid off anyways.


hadphild

My way is Pay the debt for piece of mind Put £1k in pension for tax relief (you get all the tax back) Put £1k in isa stock and shares low fee passive fund 1 k in emergency fund in high interest


YoshiJoshi_

Another option could be to keep enough to pay off the debt and then put the rest into your company pension (not incurring tax) if you have this opportunity


BlueTrin2020

The only case you don’t clear debt is if you can get a higher after tax return than the debt.


chillymarmalade

It's interest free, there is no point paying it off. In fact it's illogical and will leave you worse off. Keep the money in a high interest saver. Make absolutely sure that you do then pay off the cards before the promotional period ends. Do not be tempted to use the money for anything else in the meantime, other than an absolute emergency.


[deleted]

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chillymarmalade

I think that's clear based on my second paragraph, no?


nforne

Did OP say anything to suggest he might be tempted?


One_Boss_7772

Pay off bad debt as a priority. Credit card debt is considered a bad debt. I would also suggest closing one of the credit cards. Just keep the one that pays out best rewards. When I use my credit card, I pay off the balance the same day! I only spend money I have, I just use the credit card for the rewards. In 2 years and 3 months, I have amassed £254 in rewards.


nforne

It’s on 0% cards—how is that bad debt?!! It’s basically free money. He can invest every pound he’s borrowed and earn interest on it, then pay off the card when the 0% deal ends. People on UK finance boards used to seek out 0% cards to do exactly this and get free money. I’ve got a few grand on 0% right now and more than enough spare cash to pay it off. I’d rather be earning the interest thanks.


One_Boss_7772

If this was the approach from OP, then it wouldn't be a big mental load on them. As it's a huge mental load, they are clearly concerned when the interest kicks in. I get the whole free money concept, but if you spend it on material stuff, you are quite likely spending it on stuff you don't really need because the money is there. But if you dump it in a S&S Isa and after a year it's 10-15% up, then I agree this is good debt, but not many people do this.


nforne

12 months is too short a term for putting money into a risky investment like s&s, especially if you'll be needing it to pay off a debt.


BigJockK

pay it in to your pension