Barclaycard new (I think) deal - my brain aches...

bunking_off

My wife has just had a flyer through from Barclaycard which I think is a new deal (variation on one they offered in the past, I think). My brain aches trying to work out the implications of this one;

0% balance transfer rate for life of balance, no transfer fee
...so long as £25/month is spent on card.

Where interest is charged, it's;
12.9% if you pay 10% of balance
14.9% if you pay 5% of balance
17.9% if you pay 3% of balance off.

So, if I understand correctly, what'll happen is that you balance transfer e.g. £5k. You won't be charged interest on that, but have to spend £25 so at the end of month 1 (assuming 3% paid off) you'll be charged 1.38% [*] on £25 (ie £0.34), month 2 1.38% on £25+£25+£0.34 = £0.69 [**], month 3 1.38% on £25+£25+£25+£0.34+£0.69 = £1.05 etc etc


[*] 17.9% annual = 1.38% monthly, assuming compounding
[**] payments pay off promotional balance transfer first, so the size of the overall balance which incurs interest will gradually increase, by £25 plus the interest accrued per month?

Is my logic right? Talk about a confusing deal. Good, bad, indifferent? When would be the optimal time to pay the whole lot off? I feel a spreadsheet coming on...

nomoneytoday

Basicly they are trying to avoid stoozers.
If you pay the minimum 3% they charge you more..

grumbler

See Barclaycard 0% Forever on BT's ....

bunking_off

Actually, having modelled it, it doesn't look too bad at all.

First of all, there's a lot of variables in this. For example, I'm in a good stoozing position as I can offset into my One Account so save 5.75%. Trying out different things, paying the absolute minimum 3% yields the best returns.

Basically, the strategy to take is to leave the BT in there until the interest accrued on the stooze pot is outstripped by the interest charged on the gradually increasing £25/month. When this occurs depends on how much BT they give you. Plugging some figures in, I got the following for my particular circumstances;

On a £2k transfer the breakpoint comes after 15 months. The net gain (interest on stooze pot minus interest paid on gradually increasing balance) is £68. On a conventional 0% deal (no transfer fee, 3% pay-off per month), that's the equivalent benefit of an 8 month interest free BT.

On a £5k transfer the breakpoint comes after 25 months. The net gain (interest on stooze pot minus interest paid on gradually increasing balance) is £280. On a conventional 0% dealthat's the equivalent benefit of a 15 month interest free BT.

On a £10k transfer the breakpoint comes after 34 months. The net gain (interest on stooze pot minus interest paid on gradually increasing balance) is £742. On a conventional 0% dealthat's the equivalent benefit of a 21 month interest free BT.

Of course, this depends on ones ability to closely manage it and spend exactly £25/month. Given the above analysis, no prizes for guessing how big the credit limit initially allowed will be, however.

Be interested what conclusions anyone else draws on this...

bunking_off

At the risk of dominating a thread/talking to myself, I've had another look at this and for stoozers with offset mortgages, it isn't half bad.

Bad news is that as with other Barclaycard offers, BT is capped at £5k so the £10k scenario above couldn't happen.

However, the 0% BT offer isn't time bound. Therefore, taking the £5k scenario above, after 25 months I could clear the card, then in month 26 do another BT onto the card and start again. The only downside is that BT's are only fee-free for the first 60 days, after which there's a 2.5% charge. However, even factoring this in (assuming that the BT fee would immediately accrue interest charges at 17.9%), for a £5k transfer the breakpoint only changes to 22 months/£110 saved/equivalent of a 5 month interest free BT. As such, the card becomes a "keeper", continually doing BTs until such a time that Barclaycard withdraw the rate.

My only regret on this is that they've sent it to my wife now, rather than me a few months ago before I took out the 10 month 0% deal with them (my salary's higher so I get better credit limit).

Decadent_Fool

Oops, scrub this post of mine, still half asleep

gingercordial

Just a thought, and it would take a bit more effort, but could you buy something and then take it back every month? Say I spent £25 in a clothes shop and then returned the item the next day (as I often do as I prefer to try things on at home), would that count as the month's spend, but without actually racking up any interest?

Obviously only works if you're near the shops!

Mercuryrising

I got this through the post last month and I would have definitely gone for it.
I was well aware that the £25 I spent a month on the card would be charged APR at 12.9% but that would be fairly insignificant if I just spent £25 and no more compared with the 0% and no fees for the bulk of the rest of the balance.

The thing that stopped me was that it clearly said that minimum repayment was FIVE percent. I've never heard of such a high minium repayment amount and to afford that I would have to be incredibly disciplined and don't think I can commit to it.

Do banks send out different deals like this all the time?

Oh and I have never ever been registered with a Barclays bank account or credit card. How do they get my address?