Pay off 2.9% credit card or save it?

double0

I got an offer from Citicard for a 2.9% life of balance transfer card. I applied for it and now I'm hoping to transfer my car loan onto it via other credit cards I have. The balance on the Citicard will probably be around £8000. Would it be best for me to keep up the £237 monthly payments to the card that I currently pay on my loan, or just pay the minimum off each month and put the rest of the money into a savings account?

Many thanks

nh

The best savings accounts (eg bradford and bingley e-saver) pay over 4% after tax, or if you don't already have an ISA, you could open one of them instead and get over 5% (there may be restrictions about withdrawals etc but it is usually worth it for the extra interest. Also, you can only invest £3000 a year/£250 a month, but that is fine for your purposes).

So yes, you would make more money by paying the minimum and investing the rest, but I couldn't be sure of the exact figures (though I am sure someone else will come along soon who can!). It wouldn't be that much - 1 to 2%.

You would have to make sure you wouldn't spend the savings, because they of course would not be your money, only the interest on it would be your money, until the credit card was paid off.

How long would it take for the card to be paid off if only paying minimum balance?

You might be better off still paying the £267 (or as much as you can afford) to try to get rid of that card sooner, then apply for other 0% cards (without the £8k debt you should be accepted for more cards with higher limits) and then start stoozing properly.

Rafter

Depends whether you can earn more than 2.9% after tax in savings.

If you are a higher rate tax payer you would need to find an account that pays at least 4.8333%. (For a basic rate tax payer it is 3.7%)

Since you will be saving regularly, you should be able to get one of the monthly savings accounts from the likes of Halifax which are paying 7% plus? Watch out after the first year though because I think the rates are just introductory.

ING have one of the most competitive basic savings account which is paying 5% so the decision would be marginal.

I'd set up minimum payments onto the card and standing order the balance into a savings account to make sure I'm disciplined that I don't end up spending it and ending up with borrowing which is higher than the cars value.

R.

grumbler

Unless you cannot or do not want to get another credit card with 0% introductory offer it is still better to make minimum payments. Of course, if you do not spend the money but put it to a good saving account that will give you now at least 4% after taxes. Do not forget that you cannot use the card for purchases until you pay the transferred balance of!

nh

Have you investigated how much it costs to pay off the car loan? Sometimes it is not worth paying it off cos of the way they load the interest on at the front of the loan and also whether you have taken out PPI.

Best to get a final settlement figure and work out whether that is actually significantly less than the amount you would pay if you simply carried on at £267 per month.

double0

Thanks for your replies.

The £8000 is the total settlement amount and it would cost nearer £9000 if I just kept paying the loan company. I did some rough calculations and I would be saving a lot going to the card. Think I'll save the money as well as I'm quite disciplined with my money (apart from buying the car in the first place!).