what is the interest rate for 0% transfer??

fei_3

Hello All,

If I get 0% banlance tranfer with 3% transfer fee for a year? What is the interest rate? is this same as 3% interest rate??

[Deleted User]

0%

The 3% is a one off fee.

fei_3

Yes, i understand it's 0% interest. But what is 3% transfer fee equivalent the interest rate?? Is that 3%??

chattychappy

APR calculations exclude the fee.

If you did the balance transfer (for a 3% fee) and then paid the whole lot back after exactly one year, then it would be equivalent to an APR of 3%, ie an interest rate of 3% and no fee.

But you have to make minimum repayments during the year. So the exact equivalent rate depends on what those payments will be. The result will be more than 3% (because you pay the 3% on the whole lot, some of which will be paid back within a year), but probably not substantially so.

fei_3

Thanks for the replay. Do you think it's worth to transfer the money (0% rate with 3% transfer fee) to my mortgage based on 2.59% rate and repay back the 0% transfer within a year time??

opinions4u

It depends how quickly you reduce the balance, so answering your question accurately in advance is actually impossible.

Asusming your 0% rate lasts a year and you make 12 equal payments to clear the balance, including the 3% fee, I'd estimate an APR of around 5.9% if a personal loan was structure the same way.

peterbaker

fei, the days when it was very worthwhile comparing a "0% offer" (sic) from your Credit Card (CC) company versus offsetting it against your mortgage in some way are generally long gone unless you are stuck with a post credit-crunch high mortgage rate. One reason being the cartel imposed handling fee which you have noticed.

This is not intended as a personal criticism, but your very question indicates that you may not be totally in command of the detail of the two contracts (the card offer and your mortgage) and how loan interest works. Your mortgage rate at 2.59% seems quite tame, so surely you realise that swapping any part of it to any deal at an annual cost of a similar percentage is not likely to be very useful?

The penalty for paying off the total balance transfer on an CC offer like this a few days late on the wrong date could far outweigh any benefit of doing the transfer in the first place. You will have to make careful notes about the last date at the 0% rate and ensure you do not breach it, because 1 day at a normal CC rate of say 21.9% pa is more in interest than you would pay on the same balance in a week on your current mortgage rate. Forget to pay it back on a Thursday sometime in October 2011 and then only remember at the weekend when you have some free time to think about these things means you will have paid the equivalent of a whole month's mortgage interest just because you forgot to pay for a couple of days since weekends don't count for paying back money, but they sure count for getting charged interest on money you've borrowed!

In your case you cannot seriously be asking us if it is better to pay 3% up front as opposed to 2.59% spread over the year? Or are you asking us to speculate on whether your mortgage rate is likely to go up during the next 12 months?

If you pay off a chunk of your mortgage, how can you be sure that in 12 months time you will have the means to pay back the promotional balance transfer debt?

Or is your mortgage a true offset mortgage?

Either way, with the two interest rates you mention, you must surely understand why it is frankly rather strange that you might be contemplating such a move

fei_3

Thanks for the reply. Yes, i have a offset mortgage (2.59% rate), more i have in the saving account, less interest i will pay. I am thinking about get some extra cash in.


If I make sure paying off the 0% balance transfer based on 3% transfer fee at the end of the term, is this still worth to do??? it seems 3% transfer fee is high than my mortgage rate.

Milarky

fei wrote: »

Hello All,

If I get 0% banlance tranfer with 3% transfer fee for a year? What is the interest rate? is this same as 3% interest rate??

Try the stooze.com calculator by

i) setting 'Tax rate' to 'NOT taxed',

ii) pressing 'calculate',

iii) varying the supposed 'Savings interest rate AER' from the default and repeating step ii) until the calculated profit reaches '0.00'

For instance, doing this for a card with 3% fee, 0% for 12 months with 2% minimum payments, I got '3.3537%'

And... for a card with 3% fee, 0% for 15 months with 3% minimum payments, I got '2.95%'

i.e. these are the required AERs required to repay the original loan plus fee - which, assuming there were no fee, becomes the effective rate of interest on the 'interest-free' loan.

[Deleted User]

instead of getting money at 3% fee from a cc why not just overpay your mortgage by the amount you were going to borrow off the cc,after all in 12 months time the cc will revert to 18% apr if you dont manage to clear it,and if you are late with a single payment the 0% is nil and void

ViolaLass

fei wrote: »

it seems 3% transfer fee is high than my mortgage rate.

It seems? 3% IS higher than your mortgage rate. Why would you pay more than your mortgage rate to borrow money to pay off said mortgage?

If you want, I'll lend you all the money you need to offset your mortgage completely but it'll cost you a 10% transfer fee. Interested?