Which is better: 5.9% or 7.9%

ti1980

Time for me to do a bit of juggling where the credit cards are concerned.

I need to move £2500 and I have one card that is offering 7.9% for 6 months with no fee and the other is offering 5.9% with a £50 fee.

The card will be paid off in the 6 months so which one works out cheaper for the amount I wish to transfer?

Thanks in advance.

Anwen_2

According to the calculator here http://whatsthecost.com/snowball.aspx if you paid £440 per month on the 7.9% card, you would spend £39 on interest (and clear the card in 6 months, with the last payment being £339)

ti1980

Yeah. both the percentages are APR.

grumbler

Crude estimate: if you pay the debt by equal payments during 6 months, 2% fee is equivalent to about 2%*12/6*2=8% APR. It is obvious that 7.9% with no fee is better.


To get exact figures use http://www.bankrate.com/brm/popcalc2.asp?unroundedPayment=423.86611078902513&loanAmount=2500.00&nrOfYears=0.50&nrOfMonths=6&interestRate=7.90&startMonth=10&startDay=28&startYear=2005&monthlyPayment=+++++%3D%3D%3D%3E&showAmort=Show%2FRecalculate+Amortization+Table&monthlyAdditional=0&yearlyAdditional=0&yearlyAdditionalMonth=10&oneAdditional=0&oneAdditionalMonth=10&oneAdditionalYear=2005&paidOffDate=May+28%2C+2006 :
5.9%, £50 fee: payments 6*£423.87, total interest £43.20, total cost £93.20
7.9%, £00 fee: payments 6*£426.32, total interest £57.92

ti1980

Thank you very much for that grumbler, I had a strong feeling that the lower rate with a fee would cost more.

ti1980

So I would pay less interest with an 11.9% rate for 6 months rather than 5.9% with a £50 fee?
The fee really does play a big part, much bigger than I thought. I've never managed to get any of them to waiver a fee, but then why would they if they don't have to?

grumbler

ti1980 wrote:

So I would pay less interest with an 11.9% rate for 6 months rather than 5.9% with a £50 fee?

If the balance is the same £2500, then:

5.9%+8%=13.9%>11.9%

In fact difference this time is very small: £87.90 and £93.20 - use the calculator I advised above!

ti1980

The difference may be small but even with a fee I would have looked at 5.9% (£50 fee) and 11.9%(no fee) and thought that it would be loads cheaper to BT with the 5.9% card.

I don't have any cards that are offering 11.9%, it was just an example as to the effect of having to pay a fee.

I can't do a BT direct from the cards I need as they are both from the same company so need to use another card inbetween. With the figures I have its not worth it if I have to pay a fee.

I appreciate the reply though so thanks for that.