Is it worth balance transferring?

rosiedee

Hi Guys,
Just wanted a bit of advice. All of my debt at present is on 0% or LOB interest, bar one, the dreaded MBNA at 19.9%!! My balance on MBNA is £2500ish. I have an Egg card with a credit limit of £6900 current balance at £4600 at 5.9% life of balance. This month is my anniversary month on Egg and they are offering 0% balance transfer until Jan 09. Would it be worth me transferring the bulk of the MBNA balance to Egg? I have just finished paying off a loan freeing up about £300 a month which I fully intend to throw at the debts. My thinking is that MBNA are always bombarding me with BT deals and that I could transfer the debt back to them in January at a lower rate, albeit only a short term reduced rate, but it would mean more of my payments would be going towards paying off the debt rather than paying interest. In total I have about £400 per month to throw at this combined debt.
Any advice gratefully received.

Milarky

I wouldn't mix up a LOB rate with a 5 months (with fee) 0% offer on the same Egg account if I were you. Try to find some other way - such as you mentioned applying for a different MBNA product or (more likely) a non MBNA one to address the 19.9 rate balance.

CannyJock

Yup, I'm with Milarky on this one for sure, you need to look at the allocation of payment rules - at the end of the 5 months all payments will go against your LOB amount and you'll be whacked with interest on the amount you've transferred.

Another option would be to go for something like an Ulster Gold card, 6 months, 0% with 0% fee If accepted you'll probably get a £ 3k limit that some people have had increased to £ 3,600 on their activation call without another credit search.

I'd transfer my MBNA card to that, and then transfer "as much as possible" (should bring you up to 95% of your credit limit - their customer services people will confirm exact amount) to my Egg LOB card, pay the 3% minimum by direct debit and put the rest of your £ 400 against the LOB amount as it'll be the highest interest. That way you get to do a bit of snowballing too

Then when your Ulster 0% deal is nearly up, phone MBNA back and ask for a repeat deal. Good article on it at: http://www.stoozing.com/a_extend.htm

EDIT: Infact, now I think about it, you could save a bit more in interest if you wanted to. Once the MBNA card is cleared for a month or so, apply for a Virgin Money card. When you call to activate it, ask them to move all but £ 100 of the credit limit from your MBNA card to your Virgin Money card. Use this to clear your LOB card in full. Then ask them to transfer the "maximum possible" to your current account, this will get you up to 95% of your credit limit. Your first payment will be around 3% of your balance, the next 14 payments will be only £ 25. Leave enough to cover the first payment and put the rest into a high interest current account or Cash ISA (Kaupthing @ 6.55% would be my choice). Then each month instead of paying £ 400 to your debt, pay the £ 25 to MBNA and the 3% to Ulster Bank and put the rest into your Kaupthing account. When you need to pay the Ulster card off, just take the money out your Kaupthing account and pay it off before the 0% period ends. This way you'll earn interest on the money that will more than cover your 2.98% BT fee. Keep doing this and you should have enough in your Kaupthing account to clear your Virgin Money card by the time the 0% period there ends.

rosiedee

Hi Guys,

Thanks for the advice. Only problem is I have applied for a couple of 0% card deals recently and been declined. When I mentioned MBNA throwing offers at me, they're all on my existing card so using them isn't an option with an outstanding balance. Guess I'll just have to grit my teeth and try and clear the MBNA balance ASAP!!

Milarky

rosiedee wrote: »

Hi Guys,

Thanks for the advice. Only problem is I have applied for a couple of 0% card deals recently and been declined. When I mentioned MBNA throwing offers at me, they're all on my existing card so using them isn't an option with an outstanding balance. Guess I'll just have to grit my teeth and try and clear the MBNA balance ASAP!!

If that's the case you could always borrow the cash from somewhere to repay the amount owing to MBNA and then balance transfer back to your current account and return the borrowed cash plus interest (any helpful family members or friends could oblige?) An MBNA offer is usually open for a number of months - more than enough time to turn around a balance.