what will minimum payment be on a 0% credit card

ihateyes

demonted wrote: »

I'm considering transferring my existing credit card balance to a 18/20 months (or whatever is available) 0% interest credit card.

So when I do, what would the minimum payment be during the interest free period?

The balance I wish to transfer is just short of £4000 and my current minimum payment is £85pm of which £53pm is interest at 17.9%.

My current minimum payment is 2.25% of my existing balance.

I assume that as the interest on the new card is 0% for 18/20months then the minimum payment will be without interest, thus £32pm ?

Can anyone confirmed this, based on their own experience?



I'm aware that with a 0% balance transfer deal, its best to pay as much as possible each month to reduce or clear the existing debt during the interest free period with no additional spending.

Firstly ALL credit cards have a minimum payment, usually between 2-5%.

Read your terms and conditions..... it will say there.... the fact it's 0% means nothin..... othe than what you pay comes off the balance.

your minimum payment will not be reduced unless you find a card thats offers 2% repayment.... in all honesty you should expect to start paying around £80pm.

I hope you have only had one credit card and therefore dont reall know how these cards work.....

seriously i worked for a bank in the credit card section, and these damn things should be banned.

YorkshireBoy

demonted wrote: »

Otherwise, if the minimum payment is 2.25% of the outstanding balance regardless of being a 0 rated card or not, then how is the interest calculated on my existing card ?

Working on a balance of £4K.
The APR is 17.9%, which equates to a monthly rate of 1.3817%.
Your monthly interest is therefore £4K x 1.3817% = £55.27*
The balance is therefore £4K + £55.27 = £4,055.27
The minimum payment is therefore £4,055.27 x 2.25% = £91.24

Now when you shift your £4K debt you'll find that some credit cards require 1% + interest as a minimum payment, some 2%, some 2.25%, some 2.5%, some 3%, some even require 10%.

Your minimum payment (ignoring any BT fee payable) will then be...

1% + interest.....£40 (because there's no interest on a 0% deal!)
2%...................£80
2.25%...............£90
2.5%.................£100
3%...................£120
10%..................£400

As you can now hopefully see(?), the fact that you have a 0% card does not mean your minimum payment will then reduce. What it means is you could pay less, the same, or even more than you are now, the difference being that more of your money is coming off the balance, rather than being swallowed up by interest.


* This will vary slightly due to the number of days in the statement period.

grudz

demonted wrote: »

Yes, that's my confusion.

My current card, the interest rate is 17.9% Apr.

The Minimum payment is 2.25% of the outstanding balance.

My minimum payment is currently £85pm.

Its stated on my statement that £53pm is interest and only £32pm is actually going towards paying the debt off.

Now, it is my assumption, that if the balance is transferred to a 0% credit card, during the 18/20 interest free period, there is no interest to pay? So, in my mind, the minimum payment would only be £36pm ?

Otherwise, if the minimum payment is 2.25% of the outstanding balance regardless of being a 0 rated card or not, then how is the interest calculated on my existing card ?

My understanding is this,

For arguments sake I'll pretend your 0% card has a minimum repayment of 2.25% you will still pay £85 but the whole of that repayment will go towards your reducing your balance instead of a chunk going towards interest whilst you're on 0%. Although your monthly outgoings wont be reduced, the amount of debt on the card will be reduced more than if you was incurring interest, thus releasing "£85" per month sooner rather than later, in the long run.

If the minimum repayment is higher then your monthly outgoing will be too, but will also help to reduce the balance quicker. So if your looking to reduce your monthly expenditure in the short-term, this will/may not do that. Try other ways.

Tixy

This list of 0% cards here http://www.stoozing.com/0fees.php lists what the minimum payment is for each card. Some are as low as 1%, one is as high as 5%. You need to look at which card you intend to apply for to answer your question.

demonted

Thank you very much for everyone's time, effort, calculations, input and answers to my question, much appreciated, although I'm still a little baffled.

Seems to be some confusion regarding minimum payment % rates.

I understand minimum payment rates vary from card to card and the % of what is payable each months is stated in the T & C's.

So yes, if I chose a 0% Apr credit card with a minimum payment of 1% then my minimum payment will reduce, however, that is not quite what I was asking, maybe my question was somewhat confusing?


My conclusion, as others post have suggested, whether a 0% Apr credit card or not, if the minimum payment is 2.25% of the outstanding balance, then that is what's payable each month.


So, on my current 17.9% Apr credit card, my minimum payment is 2.25% of my outstanding balance = £85pm.

Of this £85pm, it is stated on my statement that £53 is interest, thus only £32 is actually paying off my debt.


Should I acquire a 0% Apr credit card and the minimum payment rate is also 2.25% of the outstanding balance, then my minimum payment will remain the same (£85).

However, rather than £53 be swallowed up by interest, the entire minimum payment (£85) is clearing my debt each month, yeah ?

And will continue to do so for 18/20 months, unless I chose to pay more or less.


I'm aware the minimum payment rates can vary from card to card and can be as much as 3 %.

If minimum payment rates can be more than 3 % or in fact lower, please don't post a reply to inform of such.


My initial question arose, as it is stated on my current statement that £53pm is interest.

So I assumed that, if I transferred my current outstanding balance to a 0% Apr 18/20 month credit card there would be no interest payable during the introductory/interest free period and my minimum payment would be only £32pm.

I believed and somehow still do, that if I transferred my existing balance to a 0% credit card, my minimum payments would be reduced.

I assumed that the minimum payment % rate would remain the same as my existing card or at the most, increase to 2.5%.

Believe it or not, as I'm awaiting an insurance payout, my plan was to spend more on my current credit card, up to my credit limit which would then take my minimum payment to a level I can not afford to pay.

However, if I then transfer my new much larger balance to a 18/20 month 0% credit card, I believed there would be no interest to pay and I expected the minimum payment to reduced, thus to an affordable level.

Once my insurance payout is received, I can clear the additional spending on my old card, (which is included in the balance transfer) and then pay an amount which I hope would clear my debt or at least substantially reduced it during the 18/20 month 0% Apr introductory/interest free period.

Complicated, I know.

If any of the above makes sense or anyone have experienced my complicated theory; please by all means, post a reply.

Money_maker

Looks like all the CC folks have gone to bed so as a random visitor, I'll have a go based on logic.

The minimum payment bears no correlation to the interest rate at all initially. You will notice the minimum payment will drop quicker as you will be paying off the debt itself rather than charges. This means for instance, you will be paying £85 (based on your OP figures) from your debt and therefore the next batch of interest should be based on your current debt -£85 rather than your current debt -£32 as you are currently paying. Therefore, your next minimum repayment will be a little lower and so forth as your debt decreases.

The interest rate may be 0% but the minimum payment will be based on the whole balance regardless of how much of it is interest.

taylorjeremy

The minimum payment on credit card debt is calculated as a percentage of your total current balance, or as all interest plus 1 percent of the principal.

redpete

demonted wrote: »

So yes, if I chose a 0% Apr credit card with a minimum payment of 1% then my minimum payment will reduce, however, that is not quite what I was asking, maybe my question was somewhat confusing?

The question was quite straightforward, your subsequent questions are more confusing.

My conclusion, as others post have suggested, whether a 0% Apr credit card or not, if the minimum payment is 2.25% of the outstanding balance, then that is what's payable each month.

Correct.

So, on my current 17.9% Apr credit card, my minimum payment is 2.25% of my outstanding balance = £85pm.

Of this £85pm, it is stated on my statement that £53 is interest, thus only £32 is actually paying off my debt.


Should I acquire a 0% Apr credit card and the minimum payment rate is also 2.25% of the outstanding balance, then my minimum payment will remain the same (£85).

However, rather than £53 be swallowed up by interest, the entire minimum payment (£85) is clearing my debt each month, yeah ?

Correct.

And will continue to do so for 18/20 months, unless I chose to pay more or less.

Correct.

If minimum payment rates can be more than 3 % or in fact lower, please don't post a reply to inform of such.

Oh, OK.

My initial question arose, as it is stated on my current statement that £53pm is interest.

So I assumed that, if I transferred my current outstanding balance to a 0% Apr 18/20 month credit card there would be no interest payable during the introductory/interest free period and my minimum payment would be only £32pm.

I believed and somehow still do, that if I transferred my existing balance to a 0% credit card, my minimum payments would be reduced.

But that contradicts what you say above. As others have pointed out the calculation of interest and the calculation of minimum payments are two separate things, so if one changes the other will not necessarily change.

I assumed that the minimum payment % rate would remain the same as my existing card or at the most, increase to 2.5%.

Incorrect, as pointed out by others. But apparently you don't want anyone to tell you what different 0% cards require as minimum payment rates.

Believe it or not, as I'm awaiting an insurance payout, my plan was to spend more on my current credit card, up to my credit limit which would then take my minimum payment to a level I can not afford to pay.

More important to reduce your spending to what you can afford, but you probably don't want to be told that.

However, if I then transfer my new much larger balance to a 18/20 month 0% credit card, I believed there would be no interest to pay and I expected the minimum payment to reduced, thus to an affordable level.

Hopefully you realise now that this is not what will happen. There is also no guarantee that you will be able to get a large enough credit limit on the new card (or maybe you might not even get a 0% card at all),

Once my insurance payout is received, I can clear the additional spending on my old card, (which is included in the balance transfer) and then pay an amount which I hope would clear my debt or at least substantially reduced it during the 18/20 month 0% Apr introductory/interest free period.

Insurance payouts can take a long time to be sorted out, you need to factor in the risk that you will not get the money you expect before the end of the 0% period, and that you might not be able to get a new 0% offer when the first runs out.

demonted

Thanks redpete for such a thorough explanation.

And to everyone else has who has taken the time to reply

Its not that I don't want to be told, it just my understanding of it.

I'm open to all suggestions and opinions, although ideally backed by experiences too.

With regard to "not wanting anyone to tell what different 0% cards require as a minimum payment."

I didn't quite mean it like that, I'm aware that all credit cards have different minimum payment % rates. The credit cards I've been considering, state that the minimum payment is 1% or 2.25% of the outstanding balance.

Reason I said not to post a reply if anyone knows of different rates, is because I believed it would be irrelevant to my question as I'm only considering one of two credit cards.


Yes, I was assuming I will get a 0% credit card with a large credit limit or similar to the limit I have at present. It never occurred to me a new credit card could give a much lower credit limit.

Thanks, again redpete.

Yes. I do want to reduce my spending to what I can afford and prior to my complicated theroy, my plan was to transfer my current balance to an 18/20 month 0% credit card and clear my debt within the introductory/interest free period.

However, for a tempory bassis and in anticipation of the insurance payout, of which is guarantted and due before the end of July. I planned additional spending on my current card which would have taken my minimum payment to £140 pm and close to my current credit limit.

Although ill advised, this theroy is still possible if I apply and accepted for a 0% Credit card with a minimum payment of 1%.

I understand the concept now, it may of seemed contradictory, it was clarifiction I sort.

Thanks