Minimum payments

Blue_Peter_2

Hello,

I have a £1,500 overdraft which at almost 18% is costing me! I am paying off other debts and feel unable to tackle the overdraft full on right now. But, is it a good idea to move the overdraft to a credit card with a low 'life of balance' interest rate and pay the minimum until I can start paying more? I feel like I'm losing money hand over fist at present!

If so, how can I calculate what the minimum payment will be on £1,500? I have my eye on the M&S card with the 3.9% rate.

Sorry if this is being asked elsewhere! Sorry also for my mathmatically challenged brain...:o

grumbler

See http://www.stoozing.com/0fees.htm
M&S min monthly payment is 3%. For some other low LOB rate cards it is 2%.

Warning: Danger! Avoid Minimum Repayments

sdj25

the &more credit card. All the below is taken from their Summary Box that can be found here:

Minimum payment:

Greater of 3% of the outstanding balance or £5 each month

BT Fee:

We may charge a fee of 2% of the amount of each Balance Transfer (minimum £5).

So transferring over £1500, would give you a handling fee of £30. Meaning the total of your outstanding debt will be £1530.
Interest is charged at 3.9% pa which works out as 0.325% pm.

0.325 percent of 1530 is £4.97. Giving you the first month of £1534.97. Looking at the minimum payment of 3%, that would be a first minimum payment of £46

I would recommend paying more than the min though!

sdj25

Just as an added warning, if you were to pay off the minimum payment every month on your initial balance transfer of £1500. It would take 117months for you to pay it off, that's almost 10years!

On the plus side be thankful that M&S charge a relatively high minimum payment percentage. If it were around the 2% mark it would take you about 3 years longer!

Though saying that, if you were to get a card at 17.9% (similar to your Overdraft) and paid off the min payment at 2.5% (£5 min) ... that would take you around 22yrs to clear.

Blue_Peter_2

Thanks for the guidance - it's very much appreciated. The thing is, I've had this overdraft for ages and I never pay any of it off. My thought is that if I move it to a credit card, I will HAVE to pay it off - even if just in dribs and drabs. It has to be better than giving the bank £20-odd a month for the overdraft. I think?!?

In about six months time I'll be in a far better position to up my payments considerably above the minimum...

sdj25

Just as a comparison, if you were to pay off £60 / month, it would take you just a little over two years to clear it on the 3.9% BT.

Moggles_2

Hi there and welcome to the credit card board!

Is it a good idea to move the overdraft to a credit card ...? I have my eye on the M&S card with the 3.9% rate.

You can shift a credit card balance to another credit card. Transferring a loan or an overdraft is not so straightforward.

The Marks & Spencer card issued by HSBC does not provide this facility. In fact, only a few rather special credit cards have the capability. For an explanation, please click on *Super BTs* in the black box at the top of this board.

Very best
M

Blue_Peter_2

D'oh - there goes that idea then! Thanks for pointing it out though. Sorry for being really thick (I'm not used to forums & things!) but I can't see the super BTs link you mention..

I wonder if I'm as well to shift the card debt to a loan - I must be able to beat 18% some how...

grumbler

Blue_Peter wrote:

... I can't see the super BTs link you mention..

Super BTs . The box is dark blue in fact. See also Stoozing link there. Egg Money card can be very helpful. Some explanation is also in this Martin's article: Cut Price Plastic Personal Loan.

I wonder if I'm as well to shift the card debt to a loan - I must be able to beat 18% some how...

What card debt? Do you mean your overdraft in fact? You can shift any debt to a loan because usually loan is given in cash that you can just use to pay the other debt off.

Gordon_the_Moron

If you can't find a suitable super balance transfer you could just go for a card with 0% for 9 months (Nationwide, Natwest and some others I believe, can't remember off the top of my head) for purchases and make day to day spending with the card. In the meantime what you spend on your new credit card (that would otherwise have been paid cash or by debit card) can be used as cash to clear your overdraft. In 6 months time you can start make bigger payments according to what you say so it gives you 3 months to (between month 6 and 9) to get stuck into paying off the card, otherwise just balance transfer to another 0% card.

Gordon_the_Moron

Also if your credit rating is good enough you could open an Alliance and Leicester or Nationwide account. A&L offer an overdraft at 0% for a year then 5.9%, if you can't get that account Nationwide would be your next best at 7.75% (7.25% if you have a mortgage with them)