Egg money - prepay

debbie42

Can someone explain to me the benefits of loading the Egg money card upfront?
I know you get interest on the credit, but doesn't that mean you won't benefit from any interest free period on purchases?

First time I read about the card I assumed that there wasn't any interest free period, but having looked in more detailed, it seems to me that it functions pretty much like their ordinary card in this respect. So wouldn't I be better just setting it up to take the max payment each month and keeping my savings elsewhere?

Debbie

grumbler

debbie42 wrote:

So wouldn't I be better just setting it up to take the max payment each month and keeping my savings elsewhere?

You are absoulutely right. There are no benefits in loading Egg Money upfront, although this could be more convenient for somebody.

kuohu

grumbler wrote:

You are absoulutely right. There are no benefits in loading Egg Money upfront, although this could be more convenient for somebody.

I applied for an Egg Money account because:
- my present current account doesn't pay me any interest
- I don't have a 'cashback' card to use for my regular monthly spending (about £300 on petrol and food)

So I intend to preload the Egg Money account with £300 a month, and it looks like it will kill two birds with one.. erm.. egg.

grumbler

You have up to 50 days interest-free period on purchases. Your average balance during this period is 1/2 of your monthly spending. Hence, net interest you get on your spending money is

0.8*4%*1/2*25/365=0.11%. EDIT: 0.22% in fact - see my post below

If you keep this money during 50 days on 5% savings account the net interest is

0.8*5%*50/365=0.55%.

The difference is 0.44% on all your spending on the top of 1% cashback. For £300 monthly spending this is extra £16 p.a. :think:

kuohu

Hi grumbler, yes I wasn't disagreeing with your earlier post and I guess the key word is convenience.

Could you explain the figures in your calcs though, please?

MPH80

kuohu wrote:

Hi grumbler, yes I wasn't disagreeing with your earlier post and I guess the key word is convenience.

Could you explain the figures in your calcs though, please?

0.8*4%*1/2*25/365=0.11%.

0.8*4% = the interest after tax

*1/2 = the half of the spending which is the average on a preloaded Egg Money card.

*25/365 = worked out to 25 days.

All Grumbler's showing is how much extra you earn by holding the money elsewhere rather than preloading the Money card - assuming it was in a savings account earning 5%.

M.

grumbler

Oops...:o
I think my post needs correction. The first formula should contain the same 50 (days) as the second one, as it already has 1/2 multiplier:

0.8*4%*1/2*50/365=0.22%

Difference is 0.33%.

If you preload card you get 1% cashback + 0.22% interest on total annual spending

If you don't preload and pay full ballance by DD : 1% + 0.55%

Convenience of preloading is very arguable IMO. You can pay the same amount later (in 50 days). And in this case you don't have to predict your spending. You just pay the actual amount you spent end get extra 0.33%.

YorkshireBoy

grumbler wrote:

Oops...:o
I think my post needs correction.

Don't take this the wrong way grumbler, but I'm glad there was an 'error'. I'd started to reply in your absence and then abandoned my attempt when I couldn't explain where the 25 days came from!

Convenience of preloading is very arguable IMO. You can pay the same amount later (in 50 days).

I agree, but this 50 days would be reduced by any transfer delays if you had to bring the DD amount back from an external account. For this reason I find that it's better to set the DD collection date for 3-5 days after I get paid so that the money doesn't get chance to lose interest whilst in transit (and if my salary was late I still have time to bring in some funds from elsewhere to meet the DD).

MPH80

LOL ... now I feel silly ... I got slightly confused by the 1/2 ... and all the time I should have noticed the 25 days ...

*Sigh*

M.

EagerLearner

I also pre-pay £300 to my Egg Money card each month. So the consensus is that it's better to leave the money in say an Alliance & Leicester 6% account, then DD whatever was spent on the Egg Money card in the previous month?