moneystar

The answer is to try both. its important to have a cash reserve to fall back on so that you dont rely on credit cards especially when your credit limit can be reduced or withdrawn at any time. if you have a good credit record you should look at a balance transfer deal. the 0% deals are good if you can repay the full debt in the 0% limit but this can sometimes be only 12 months and with a 3% average fee to move balances you might be better to look for a transfer rate "for life" where you could pay a typical 4-4.5% on a balance for as long as it takes to repay it which will work out cheaper in the long run.

people have a different view of how much cash you should keep but you need to consider how long your current cash would last if you lost your job/income. a good starting place is 3 months income or outogings (the higher of the 2) as a safety cushion.

i generally agree with rsmith above.

you need to review your debts in terms of % cost and the monthly minimum payments.

if you have determined that you will still have adequate cash for emergencies after paying off your debt, there is no harm in doing so.

with a good credit file you can always borrow back if you need to.

No Interest is paid on loans of cash. We should all be most familiar with interest.

By contrast Dividends are the business investment trading returns 'divvied' up ('divided up' if you prefer) between shareholders. If the shareholders - who own the business - can afford and desire to do so, they can award themselves a dividend. However if no profit is being made or capital is felt more desired to be reinvested into the business then a reduced dividend, or no dividend at all, will be paid. Interest is typically paid on a regular (often monthly or annual) basis - typically at a defined rate of return for a defined period. The loan of capital on which the interest is being paid is then repaid - or the investor can accept a revised rate of interest return.

Dividends are typically paid twice a year. An interrim amount half way through the year and a final amount designed to more accurately reflect the whole trading year profits. Some businesses will pay more frequesnt dividuends which attract those sekeing more regualr income payments but these are in the minority.

Dividends are often unrelated to the current share price of the underlying company paying them. Thus a company can see its share price fall or rise whilst its dividend is maintianed or even increased! A few compaines have even managed to pay an ever increasing dividend every year for over tweny years. Others have of course come and gone in this time.

It might be argued that dividends are part of the return to investors who have taken the risk of investing in that particular business and as such should pay a risk premium better than interest. However you can make relatively safe loans in return for typiclly low interest payments and you can also make relatively speculative loans in return for higher promised interest payments - but at much greater risk of capital loss.

Shares are, much as the name suggests, part ownership of a company. For safety most investors are advised to only buy shares in trading companies listed on recognised stock exchanges. These range from the top UK 100 companies to younger, typically much smaller, companies listed on AIM or indeed a foreign listed company. Depending on which stock you buy and its trading philosophy - i.e long term growth or shorter term regualr cash generation (which allows for regular dividend payments) you can expect to see at least a dividend return very quickly. If the share price rises overnight it is also entirely possible to make a gain very short time. However, for most, it is much, much better to let a specialist choose a range of stocks to hold for you and a group of similarly minded individuals, and then hold and manage these on your behalf. In this way you 'pool' your risk by having your capital spread across a number of underlying companies and there is also the advantage of the fund manager using his expertise and resources to identify the best stocks to buy and hold in your collective fund.

Such funds are avialbe in every style and market - i.e. 'UK equity growth' or, for those seeking an income, 'UK fixed Interest' for example. These are known as Unit trust funds or OEICs and most can enjoy the added advantage of being sheltered from most UK taxes by being held in an ISA.

Best advice is that investors should always plan to invest for at least five years as stock markets and shares are notorious for constantly rising and falling prices. However, historically there have been more rises than falls such that, over the medium to longer term ( 5 yrs or more) you increae the odds of coming out ahead.

You may be lucky and make money overnight. But this would be high risk. You might also loose equally quickly. This is where a good fund manager should help you avoid the worst excesses. (There are over 2,500 such funds to choose from).

Be warned that if you choose to go it alone collective wisdom is that you need at least ten separate lines of stock, in unrelated industries (do not buy both HSBC and Barclays for example) and that each stock holding should be at least £10,000 to achieve both a well diverisified collection of investments each with sufficient exposure to make any gains worthwhile! Ten per cent profit on £500 being barely worthwhile especsilly after trading costs (the bid offer spread etc) are taken into account

The reason is that bank accounts are a very "sticky" product, people seldom change banks even with £100 up for grabs as you have to get used to a whole new set of banking habits and rules etc.

also the average bank account application contains almost as much sensitive information as a mortgage and banks can use this data to cross sell other more profitable products to you such as their home insurance, personal loans, investments etc.

i have a client that was persuaded to pay £10pm for a premium bank account with all the frills even though she seldom drives so the breakdown cover wasnt worth much, was too old to be covered on the travel insurance, doesnt have a mobile phone so wont need to insure one, doesnt buy foreign currency as she holidays in the UK.... you get the drift. but what did she get in return? 5% on her account balance up to £2500 as long as she pays in £1000pm. her income is fine but she likes to keep a little more in the account so as she breaches the cash limit she actually earns 0.1% pa (same as before) but now pays £10pm for the privilege!