Credit Card into ISA??

suz_87

Hi,

I currently have not used a lot of my cash ISA allowance for the year however i've had a thought I have £1500 credit limit on my credit card with one about £100 outstanding.

Is it a good idea to transfer the remaining £1400 into my ISA before the end of the financial year and then once my interest has been paid transfer the money back to my credit card?

Onawingandaprayer

erm no. :eek: It'll cost you more (in credit card charges) than you'll make in interest earned, presumably for just a few days.

Steer clear.

bigfreddiel

credit cards cannot be used to fund isas - you have to use a debit card - so take cash out with your credit card - pay extortionate interest straight away - pay it into your bank - fund isa with debit card

simples - may be expensive tho'!

fj

thenudeone

completely daft.

unless your credit card is offering 0% interest on money transfers for 12 months for a fee which is less than the interest you will earn on the ISA

gkerr4

at first i thought you were mad, but actually it is much more complex.

by not doing what you have suggested, you miss out on (potentially) years of tax-free interest and compounding (assuming that you are going to keep the cash there for many years). And this window of opportunity will close at the end of the tax year.

But by doing so, you set yourself up for higher interest on a credit card.

I guess, if you knew you were going to keep the cash ISA for many years AND you knew you were going to come into some money in the very near future (like, april) and can pay the credit card off in full before interest is charged, then it might be worth it.

Onawingandaprayer

gkerr4 wrote: »

(assuming that you are going to keep the cash there for many years).

Don't think so. OP suggested as soon as they get the interest they will use it to pay off the credit card. Gulp!

MoneySaverLog

gkerr4 wrote: »

at first i thought you were mad, but actually it is much more complex.

by not doing what you have suggested, you miss out on (potentially) years of tax-free interest and compounding (assuming that you are going to keep the cash there for many years). And this window of opportunity will close at the end of the tax year.

Onawingandaprayer wrote: »

Don't think so. OP suggested as soon as they get the interest they will use it to pay off the credit card. Gulp!

It does make a interesting point though if you could get a zero percent APR card and pay it back quickly to avoid any interest at all. I believe there may be a fee involved in doing the transfer though as a cash advance and not sure how long you'd be paying interest for as I don't do credit cards anymore.

But even so if it was short term loan on the card to get the money in before the 6th April over the years, if you did keep the money in, then it may well be worth doing as you'll always have this years allowance available for future years. If you don't use the allowance then you've lost it come April 6th.

So I guess I'm saying if you can pay the card off quickly and it is short term it may be worth funding a ISA with your credit card to get the benefit of this years allowance and interest in the many years to come

lisyloo

Is it a good idea to transfer the remaining £1400 into my ISA before the end of the financial year and then once my interest has been paid transfer the money back to my credit card?

No it's a terrible idea.
Even 0% cards have transfer fees of about 4% which will exceed the ISA interest.
Most have interest rates about 30%.

Also withdrawing cash in the way you describe can be a red flag on your credit report.

poorgirl-54

DO IT!
i did, otherwise you will loose the isa limit and miss out on tax savings the larger your isa grows and credit card can be paid off any time- with your overdraft which may be a low charge, as mine was compared to credit card

indie80

Don't do it with a normal credit card as the cash advance fee (4%) is greater than the interest rate you'll get and you'll pay for borrowing the money. It's a bad idea.

But there is a way around it with a 0% purchase card if you don't mind the hassle. You can get them with 0% for 15 months. Use the card for your regular spending and pay the minimum each month. Put the remainder of your cash from what you would have used to pay your monthly credit card bill off into your ISA. Come the end of the TAX year pay the credit card off.

Though it's probably not the most efficient use of your TAX free savings allowance as you'd loose out on subsequent years, it depends how much you'll have to put into savings each year. You'd probably be better off by using a regular savings account for that purpose if you'd have enough to contribute towards both.

lisyloo

credit card can be paid off any time- with your overdraft which may be a low charge, as mine was compared to credit card

So how much did you pay in transfer fees and interest?
Normally this is going to be more than the ISA rates.

There are variations and you need to DO THE MATHS in each case.
I'm "stoozing" a 0.99% mortgage but that's an exception case.
I have no transfer fees.
Normally credit cards have 4% transfer fees even if interest is 0%.

On the whole this is NOT a runner, but there are exceptions.