0% on purchases for x months or 1% cashback..?

jdavtz · 21 March 2006 at 6:51PM

Can someone help me with the maths on this (should be simple but I'm not sure I'm calculating the right thing correctly and would appreciate some confirmation).

What's better - a 0% for maybe 9 months on purchases with minimum repayments (e.g. any suggestions of a good card?) ... or 1% cashback with e.g. Egg Money?

My calculations (which could be very wrong) seem to point to 1% cashback being nowhere near as good...

e.g. say £500/month spend on average, then

9m at 0%, ignoring minimum repayments, getting about 4% after tax in savings account, gives £135 interest.

1% cashback would only give £45 over the same time period.

Are these calculations correct?? And if so, why are cashback cards being promoted so much?

Thanks,
Jonathan.

grumbler · 21 March 2006 at 9:54PM

jdavtz wrote:

e.g. say £500/month spend on average, then

9m at 0%, ignoring minimum repayments, getting about 4% after tax in savings account, gives £135 interest.

Are these calculations correct??

No. £500*9*0.5*4%*9/12=£67.5, but this is still better than £45.
Simpler calculation: 4%*0.5*9/12>1%.

And if so, why are cashback cards being promoted so much?

Because there is no need to change cards to get cashback. If you are prepared to switch cards every 6-9 months you can make about twice as much by using 0% on BTs instead of 0% on purchases: REVENGE! Make Free Cash from Credit Cards. In this case 0% on purchases is good to accumulate initial balance to transfer later: see The Easy Route in the above article.

0% on purchases for x months or 1% cashback..?

Comments

Confirm your email address to Create Threads and Reply

🚀 Getting Started

Categories

Is this how you want to be seen?

Get our FREE Weekly email full of deals & guides - and it’s spam-free