Naive new question

James_N

I have just got a new BT card (really MBNA), I really on got it as an emergency card for my son. But they've sent me cheques for using and advise I can use them for balance transfers.
So can I really write a cheque, use their money to open an interest saving account, and then sit back and take their money for a year? I thought you had to nominate another credit card company directly TO them to do this balance transfer thing. So can I write a cheque to just anyone and still get interst free credit?
With no catches? Apart from not using the card now, that is, I understand that.
if so - what account is best to go for?

CannyJock

There's probably a 4% fee for using the cheque. But yes, MBNA are one of the few card providers who do this.

You also need to make the minimum repayments on the card and be sure to clear it before the 0% period runs out.

Where to put the money to earn enough interest is the big question, some suggestions on the stoozing site.

I'd run the numbers through the stoozing calculator first to see if there's a profit to be had: http://www.stoozing.com/calc.php

kalaika

You may find that hidden in the depths of your T&C's are the answers you need and without reading them I can't be sure, but if you write one of these cheques to yourself to open a savings account, they may class that as a cash withdrawal and it probably won't fall under your interest free conditions which means they could be charging you interest from the day the cheque is cashed and is likely to be at a high interest rate.

Eydon

Also, bear in mind that if you do balance transfer onto this card, you will need to get another credit card for your son to use in an emergency, because the golden rule of balance transferring is to never, ever spend on the card if you have transferred a balance to it.

This is because MBNA (like most, but not all providers) will apportion any payments you make to the card to the balance at the lowest interest rate.

So, let's say you transfer £5000 at 0%, and then some time later your son has an emergency and puts a £1000 purchase on the card. Any payment you make to the card will go to paying off the £5000 first. In the meantime, the £1000 will sit there accummulating interest at your normal purchase rate. You will only start to pay off the £1000 purchase once the £5000 has been paid off in full.

Hope that makes sense, and apologies if I'm teaching you to suck eggs.

EDIT: sorry - I've just seen in your OP that you know not to spend on the card as well. My mistake for not reading your entire post before hitting the reply button.

James_N

kalaika wrote: »

You may find that hidden in the depths of your T&C's are the answers you need and without reading them I can't be sure, but if you write one of these cheques to yourself to open a savings account, they may class that as a cash withdrawal and it probably won't fall under your interest free conditions which means they could be charging you interest from the day the cheque is cashed and is likely to be at a high interest rate.

Yep, I'd missed it - a 3% charge! Shredder for these then.

moneysavingmarrow

James_N wrote: »

Yep, I'd missed it - a 3% charge! Shredder for these then.

Pure speculation on my part, but, take into consideration that you may be paying 4.5% on your mortgage, which is equivelent to 6% for a basic rate tax payer "saving" with that company, if you could make an "over payment"!

James_N

moneysavingmarrow wrote: »

Pure speculation on my part, but, take into consideration that you may be paying 4.5% on your mortgage, which is equivelent to 6% for a basic rate tax payer "saving" with that company, if you could make an "over payment"!

Good idea though for some.

Apply for BT credit card to do it. I had £6000 credit offered.

YorkshireBoy

moneysavingmarrow wrote: »

...take into consideration that you may be paying 4.5% on your mortgage, which is equivelent to 6% for a basic rate tax payer "saving" with that company...

4.5% 'grossed up' for a basic rate tax payer is only 5.625%. I realise it's only a small difference, but it could mean a potential profit becomes a loss!

moneysavingmarrow

YorkshireBoy wrote: »

4.5% 'grossed up' for a basic rate tax payer is only 5.625%. I realise it's only a small difference, but it could mean a potential profit becomes a loss!

Sorry............had a brain storm and took basic tax to be 25%................but of course, it is "only" 20%.
(Divide your interest rate by 4 and multiply that answer by 5 to give a grossed %age).
Apologies.

Currently on N.Rock standard variable of 4.79, so any cash stashed in there that may have cost 3% to aquire for a year, earns 2.9875%