Sainsburys Credit Card

Mizz_Pink

Hiya,

I have applied and been accepted for a Sainsburys credit card after taking advice on Martin's recent article, (best for purchases 0% for 12 months). I was considering transfering a balance if my limit was high enough as they offer 5.9% for life of balance. I currently pay 14.9% on Egg but i transfered £1200 in Jan for 0%. Martin has put a warning on the article saying do not balance transfer on the sainsburys as he says they have implications on the way repayments are allocated.
Can anyone expend further on this as it seems a really a good idea ?!!
Perhaps Martin could reply.......and make me a very happy lady as i think he is just wonderful X

Martinslovechild

Mizz Pink,

Most credit card companies allocate monthly payments to the proportion of debt on the lowest rate of interest first. For example, let's assume that you make £3000 worth of purchases at Sainsbury Card's 0% rate, followed by a Balance Transfer of £2000 at 12.9%.

If you only pay the minimum payment, then this would be used to pay off the proportion at 0% before a single penny is allocated to paying off the balance at 12.9%. So - while your £3000 proportion is decreasing, your £2000 proportion is nicely increasing - at 12.9%!!!

The rule of thumb with the Sainsbury's Card is therefore use it for purchases only. Additionally, because Sainsbury's offer the 0% rate for 12 months, I recommend opening a High Interest Savings Account (e.g. ING Direct or Egg Savings). Pay Sainsbury's only the minimum payment for the first 12 months and deposit the remainder in the Savings Account; this will hopefully make you a few quid in interest over the course of the year.

For example, let's assume that you spend £1,000 per month on the card and the minimum monthly repayment is 2%.

After one month, the minimum repayment would be £1000 x 2% = £20, so pay Sainsbury's the £20 and deposit the £980 remainder into your Savings Account.

Month 2 comes along, you spend another £1000, so now your balance is £1980 (i.e. £980 from last month plus £1000 this month). Your monthly minimum payment this month would be £1980 x 2% = £39.60. So pay the £39.60 to Sainsbury's and again deposit the remainder (£960.40) into the Savings Account.

At the end of the 12 months, withdraw the whole lot out from the Savings Account and pay off the Sainsbury's Card. You get to keep the interest accrued from the Savings Account for yourself.

Cardinal-Red

Martinslovechild wrote:

The rule of thumb with the Sainsbury's Card is therefore use it for purchases only. Additionally, because Sainsbury's offer the 0% rate for 12 months, I recommend opening a High Interest Savings Account (e.g. ING Direct or Egg Savings). Pay Sainsbury's only the minimum payment for the first 12 months and deposit the remainder in the Savings Account; this will hopefully make you a few quid in interest over the course of the year

Wow, a kind of 'second-degree stooze' - interesting...

baffcat

Martinslovechild wrote:

After one month, the minimum repayment would be £1000 x 2% = £20, so pay Sainsbury's the £20 and deposit the £980 remainder into your Savings Account.

Month 2 comes along, you spend another £1000, so now your balance is £1980 (i.e. £980 from last month plus £1000 this month). Your monthly minimum payment this month would be £1980 x 2% = £39.60. So pay the £39.60 to Sainsbury's and again deposit the remainder (£960.40) into the Savings Account.

At the end of the 12 months, withdraw the whole lot out from the Savings Account and pay off the Sainsbury's Card. You get to keep the interest accrued from the Savings Account for yourself.

We use a Tesco card for all our monthly purchases, and pay off in full. With the fuel I use for work also going onto a clubcard, this has given us up to £300 or so in Tesco points, which we've used until last Christmas to buy our holiday food & drnik. Thanks to this site, this year we bought presents instead, multiplying the value of the points four-fold.

I saw the Sainbos card had o% for purchases, and was thinking along the same lines as MLC. Having seen it typed out so clearly, my first action tomorrow is to apply for one of the Sainsbos cards. A normal monthly spend for us is £1500, and having a One account means we'll be quids-in doing this in addition to the BTs we started using in December.

Our monthly interest has already dropped by £100ish, using the Sainsbos card over 12 months will probably save us another £800, and I'll still be getting clubcard points on my fuel and anything I buy in Tescos.

Gotta love this site, you really do.

Baff :-)

Martinslovechild

baffcat wrote:

I saw the Sainbos card had o% for purchases, and was thinking along the same lines as MLC. Having seen it typed out so clearly, my first action tomorrow is to apply for one of the Sainsbos cards.

You've brought a smile to my face Baffcat. Thank You.

I love Cambridge, by the way. I was there (briefly) twice last year. Great place.

Galstonian

Cardinal-Red wrote:

Wow, a kind of 'second-degree stooze' - interesting...

And also an excellent way to build up a decent balance to transfer to another card without getting caught up in the complexities of transferring to current accounts.

monki_man

MLC, I dont quite get this but I want to know how you can use Sainsbruy card to move £1000 into your savings? Cash advance? paying yourself? BT?

Joe_Bloggs

@monki_man
If you had this card then you could buy things up to your credit limit and pay no interest on your purchases. This product encourages debt. To get round this fuuture debt at a high interests rates in 1 year, you can open a seperate savings account elsewhere. In this savings account you can deposit an equal amount of money that you spent on your 0% purchase card. This savings account can be supplied from your current account/wages/salary etc.

You will benefit from the interest on the money that you had in the savings account, the interest is yours but the money that earned it has to be paid back to the credit card company before they get serious and start charging you very high interest.
J_B.

Martinslovechild

monki_man wrote:

MLC, I dont quite get this but I want to know how you can use Sainsbruy card to move £1000 into your savings? Cash advance? paying yourself? BT?

Monki,

The Sainsbury's Card offers a 0% rate on purchases only. In my example above, I describe somebody who has a monthly spend of £1000.

Let's also assume that the person has just been paid and has £1000 left over after bills have been paid and this is sitting in his current account.

Now, the individual goes on a spending spree and spends £1000 on his Sainsbury's Card. When the bill arrives, he doesn't pay off the full £1000 but only the minimum payment, which if it's 2%, is £20.

This then means that he has the other £980 still sitting in his current account which he can then move into a savings account. He can only do this for the first 12 months of course; after this time, the rate for purchases reverts to something like 12.9%.

However, just before the rate reverts to 12.9%, he must transfer the cash from the savings account back into his current account from where he will pay the card off in full, thereby incurring no interest charges whatsoever. The interest from the savings account is his to keep.

Unbelievable_2

monki_man

MLC is saying that if you normally pay off your CC in full each month - then get a 0% Sainsbury card, make purchases as normal. When your statement arrives instead of paying the balance in full just make the minimum payment (obviously) but then pay the rest of the money you would have spent settling the credit card balance into a savings account. This way you put enough money into savings to pay off the Sainsbury card when the 0% runs out, and you also get the added bonus of savings interest. It's a bit like a trickle balance transfer - but you can only do it if you had enough money to settle the monthly credit card bill in full in the first place.

EDIT: sorry MLC - didn't realise you were around - ignore me

Martinslovechild

Unbelievable wrote:

sorry MLC - didn't realise you were around - ignore me

On the contrary, Unbelievable.

Seeing as you're around, I'll crack open a bottle of wine