0% credit cards, it's long but would someone please check my thinking?

[phdlife]

We've got £3000 on our credit card, and are thinking of transferring to a 0% interest one.

My logic was, well we could pay it all off now, but IF it's on a 0% interest, we could keep that money in a savings account getting 6% or so, then pay it all off at the end of the 12m promotional period.

Alternatively, we could budget £100 a month for it, but again thought we'd be better off putting that away, earning the interest for 12m, then paying off the debt.

But am I correct in understanding that even with 0% you still make minimum monthly repayments? If so we'd be paying about £60 a month and only putting £40 away; I think it's still worth it if we put it in a saver that pays interest monthly - is that right?

DH gets all pale and sweaty when I talk money, need someone to come be hardheaded with me please

Yes you still have to pay monthly repayments.

not sure it is worth the hassle personally to say £40 per month for the interest which won't be that much^.

But then you have to remember you normally pay a % of the balance as a minimum payment of the balance each month, so the amount you would have to pay in a few months will be less so you could save more IISWIM.

Having said that if your minimum payment is 3% (I guess this depends on the carf) then your starting payments £60

Message withdrawn

A lot of companies are charging for balance transfers now.

Why don't you put £3000 in savings now and take you payments from that each month?

That way the first month you get £3000 worth interest not £40 worth interest IISWIM.

For this to work ou also need your interest to be calculated monthly or daily (doesn't necessarily need to be paid monthly)

We've got the £3000 in savings already, it's just a question of whether to

a) take it out and pay off the whole debt (this is how we've always operated in the past)

b) leave it there and pay off £100pm (that's all I can squeeze out of dh's paycheck); then take what I need from savings at end of year to repay debt (effectively, not saving anything during the year)

c) leave the £3000 there and pay minimum monthly amount, ie, about £60; add remaining £40 to the £3000 each month, then take what I need from (somewhat bigger) savings at end of year to repay debt

We are saving hard atm for big international move in 2008!

So in option a) you would be putting £100 savings away each month away as well?

I would go for c) Leave £3000 in high interest savings and add to it if you can. Even if you don't your £3000 is earning interest which it won't be in option a) wo anything you add to it over the repayment period.

As pointed out though check how much it will actually cost you in charges and what the monthly repayments will be as I think £60 is an underestimate.

Also bear in mind that you may not get a £3000 credit limit on a single card to start with.

Yes of COURSE you're better off saving at 6% and borrowing (i.e. leaving it on a 0% card) at 0%

But yes, you MUST make min repayments EVERY MONTH regardless of the interest rate on the card. If you can afford to, set up a direct debit for MORE than the minimum and enough to clear it before the 0% deal ends. Therefore:

£3k @ % - interest monthly = £0 every month in interest
repayments @ £250/month x 12 months = clear card at end of 12 months having paid no interest
in the meantime every month your cash is in an account paying interest, less £250/month direct debit
Bear in mind there will be a bal transfer fee of 2.5% prob = £75

Or, if you can't afford to pay £250 a month, then transfer it again at the end of the bal tft offer.

NEVER spend on the card, purchases won't be 0% and nor will cash advances. Abnd never leave the debt there loing enough to incur intererst.

It's ALWAYS worth transferring to a 0% deal even if you're only going to repay the minimum each month. Because while you're paying the interest, the min barely covers it. So you can have a card where you make repayments of say £175 a month and £173 of it, I KID YOU NOT!, is paying the interest, whereas £2 is paid off your balance.

so go for it, regardless of what you've got avail to pay. You must pay the minimum regardless, it might as well go towards the debt, not interst.

hm okay ScaryMonster, that was what I was thinking. Halifax has a 0% transfer, 0% on purchases deal atm - 3% fee (ie £90) and min repayments is 2% which I make to be £60pm?

not sure I fully understand your 1st post WWW, but def understand the 2nd!

thanks for advice, everyone, feel much clearer now.

Just something I would like to throw into the pot.
There is a theory that if you had a 0% interest credit card then the best way to make the most of it is to spend, spend, spend - all your day to day purchases - everythign possible for the term of the 0%. Meanwhile all your wages and income should be going into a high interest account. By the end of the 0% period your money will have grown so you can pay off the credit card in full and have made some money in interest.

empen we used to do something like this in Australia, it had a name which I cannot now recall.

You'd use the credit card to buy everything, taking advantage of 60 day interest-free-on purchases period. Then at end of each month, pay off the whole thing. It worked very well for us then!

(don't think I could persuade dh that this was a good idea now, though I can totally see where you're coming from!)

Have a look at the M&S credit card. They offer a lifetime rate of about 4.9% on balance transfers, and no fee for transferring.

See here. Actually it's 5.9% now; so you wouldn't make anything but it wouldn't cost you anything either, and you wouldn't have to keep switching from card to card.

Or you could just pay it off, if you can!

Sorry but www is wrong. if you have a 0% deal and savings to pay off balance then only ever make minimum payments,leave capital earning iterets and pay off at end. But you have to be very disciplined.

But phd remember that you are paying 3% of the total for 1 years worth of 0%. So you are effectively paying interest of 3% on the card., and earning 6% on your cash. If this is in a tax paying account and you arepaying 40% tax you are therefre only clearing 0.6% by doing this. Not worth it IMHO.

(I speak as one who knows btw - in the heyday of 0% interest deals I had over £60,000 on 0% credit cards - made a fortune out of banks but had spreadsheets galore to manage it all)

empen's idea is what I do now - take out a credit card with 0% on purchases, max it out over the 6 months by putting evrything on it, and make sure I put the full balance (less the minimum payment which goes to the card company) into a savings account each month. So at end of period the interest I have made on the savings account is free cash.

phdlife - its called stoozing here - and doing it with purchases a la prufrock is called slow stoozing. Not sure what they called it in Oz though!

sorry if I was wrong, was assuming you'd want to pay if off before 0% ended, but Prufrock is quite right, it's better to pay the minimym and clear the debt at the end or transfer it agian.