Calculation needed

Gambit

Hey guys, I'm wondering if anyone can help. I've currently got debt on an MBNA credit card for the very good life of balance rate of 5.9%. I also recently got an Abbey Zero credit card (after much problems with my application - no surprise there... its Abbey after all! :rotfl:) with a £1000 credit limit. I am planning to and will be able to pay off £1000 off my MBNA credit card by the end of the year.

My question is this: Considering I'm able to pay off a grand from the MBNA credit card by the end of the year should I use the money from Abbey's Zero CC to pay this off now and save myself a few months interest or should I put it into a savings account and grab the interest.
In other words which interest rate is higher: 5.9% on a CC or 6.55% in savings (minus the tax that will be taken off me as a basic tax payer). My gut feeling is to pay off the MBNA CC but wanted some figures to back me up (or not as the case may be).

Thanks to anyone who can help! :beer:

Lokolo

If you are a normal tax rate payer the actual rate on the 6.55 is 5.24%. So no, its not worth putting in the savings account. However, if you get an ISA, and put the money in that with a rate larger than 5.9% then yes, it will be worth it.

Milarky

If you could net more than 5.9% (actually, it's '5.95') then it makes send to keep any debt at that rate. If not then paying off the card with £1000 currently stoozed on the 0% for 6 months sounds slightly better.

What makes me instantly question this however is that you only have one £1000 available - and in six months time the rate on the Abbey goes up. Thus I would keep that money (or at least £800 of it) 'on ice' waiting for that day and simply stick to the minimum repayments on the LOB card.

Are you a 'stoozer' (i.e have no net debt) or not I question?

Gambit

Milarky wrote: »

Are you a 'stoozer' (i.e have no net debt) or not I question?

I do have debt unfortunately but all the interest bearing debt is on the MBNA CC at that LOB rate. Thought I would take advantage of the Abbey Zero CC before it dissapears despite having some debt but know that whatever I borrow off the Abbey card, I can pay back before the 6 months is up...

Gambit

loaner wrote: »

With these sort of amounts and rates, even in an isa, the difference is a couple of quid, it may cost you more than that to open an account (bus/petrol).

Luckily I have a travelcard... :rotfl:

But I take your point! Think I'm just gonna pay off my MBNA card and help reduce the interest on that. Thanks for all the responses guys! :beer: