Balance transfer - help me work this out! (Please)

[Iggi999]

Hello,
Trying to get my head round which of these options is better (you can see why I haven't balanced the budget!)
I have a balance to transfer and two choices - a promotional rate of 0% interest for 18 months with a 3% fee, or 5.9% p.a. interest with now fee - both cards I already own.
3% sounds better, but is the 5.9 taken every month or is that divided in some way?
Would appreciate some mumsnet wisdom!

[CuttingOutTheCrap]

How quickly do you plan to clear the balance? Unless it's less than six months the 3 % card is better.

[Iggi999]

Thank you, that helps me understand it better actually - so, a year at that low rate is equivalent to a 5.9% fee? Definitely the other one is better, maintaining the debt (not massive, but a few thousand) until childcare drops or we move house when we could pay it off at once.

[CuttingOutTheCrap]

I'm no expert, but to put it roughly - on the 3% card (lets call it card A) you pay a single fee on the amount you owe and thats added right at the start. Lets say you owe £2000. So 3% of that is £60. So you owe £2060 and have 18 months to pay that off before the are any more charges.

Card B, the 5.9% one, the rate is gradual, so if you paid the debt quickly, you wouldn't much extra at all (less than £10 extra if paid after 1 month for example) but that small amount is added to the debt each time, so, while on card A you pay £2060 in total over 18 months, on card B it's more like £2095. Google a credit card repayment calculator like the one here and check out your actual figures.

Also you are probably already aware, but those rates are usually only for the transferred debt, so if you spend more on the card after that it will probably be at a much higher rate!

[CuttingOutTheCrap]

Oh, just realised you said you plan to pay off all at once, so card A is even better for you then, as my illustration of card B assumed a constant payment to pay the debt - if you plan on making just the minimum payment until you pay off a lump sum, then card a still costs the same, but card B costs a bit more than my example because the debt each month is larger (compound interest)

[Iggi999]

Thank you - this has been very helpful. I couldn't see why the larger rate but no fee was being sent to me as some amazing offer!