Credit Card into ISA??

thenudeone

poorgirl-54 wrote: »

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

Do the maths.

If you invest £1000 in a standard savings account at 3% for 20 years you'll get £758.67 in interest less 20% tax = £151.73.
The same amount in a 3% ISA will give £806.11 in interest.
The benefit of the ISA over 20 years is just £199

If your credit card charges 4% for a money transfer and 2% a month interest, then by the time 7 months is up you'll already have paid £218.53 in fees and interest.

So even assuming you will definitely be able to leave the money in for 20 years AND you'll still be a taxpayer for 20 years AND that ISAs will still be tax free AND that savings interest will still be taxable; it's only worthwhile if you can definitely pay off the card in 6 months or so and will never ever need to borrow to make up for the money that you've left in the ISA.

If you want to take all of those risks and are prepared to wait another 19½ years to recoup the cost of the fees and charges that you've paid for - go ahead. But a 20 year payback on any investment with those risks is never going to get my money!

VT82

thenudeone wrote: »

Do the maths.

<snip>

If you want to take all of those risks and are prepared to wait another 19½ years to recoup the cost of the fees and charges that you've paid for - go ahead. But a 20 year payback on any investment with those risks is never going to get my money!

Excellent post. Needs a few 'N.B's' around assuming that the savings rate remains at 3% for the duration, but otherwise thanks for taking time to put the the theory into some numbers :T

Onawingandaprayer

Why not get onto Ocean Finance and borrow the whole isa limit and whack it into one?

Go on, go for it. :j

gadgetmind

Credit cards have two advantages.

1) Protection in case retailer goes bust or flogs dodgy goods.
2) Some have cash back.

We use credit cards, but only because of 1 and 2, and we have all of our cards on full payment by direct debit every month.

Never use them to borrow other than at 0%. Never use them for cash advances.

Simples!

sabretoothtigger

plenty of companies are rated twenty times price to earnings.
However a company has growth potential where as cash is negative to the rate of inflation so represents an actual loss for which borrowing to do, makes no sense at all

zero fees and zero interest and sure maybe

bigfreddiel

thenudeone wrote: »

Do the maths.

If you invest £1000 in a standard savings account at 3% for 20 years you'll get £758.67 in interest less 20% tax = £151.73.
The same amount in a 3% ISA will give £806.11 in interest.
The benefit of the ISA over 20 years is just £199

not sure your % calcs are correct - i make it as this
year 20 at 3% taxed at 20% £569
year 20 at 3% in an isa £754

fj

poorgirl-54

wow the opposition and interesting comments.
It depends on the risk your willing to put in, at the moment ISA is the only savings worth it i believe over a long period, other accounts pay lower %

all the more reason to invest and maximise the ISA allowance, if possibly the in the future they will scrap the isa tax efficient savings, to get maximum benefit for anyone individual.

gadgetmind

poorgirl-54 wrote: »

if possibly the in the future they will scrap the isa tax efficient savings

They've been going since 1986 (as PEPs) and over that time contribution limits have continued to go up, and they have even been getting simpler. I think it unlikely that much will happen to them and the first sign of trouble would be freezing of the contribution limits.

thenudeone

bigfreddiel wrote: »

not sure your % calcs are correct - i make it as this
year 20 at 3% taxed at 20% £569
year 20 at 3% in an isa £754

fj

Here are my numbers:

With tax deducted

year o/bal Interest tax c/bal
1 1,000.00 30.00 -6.00 1,024.00
2 1,024.00 30.72 -6.14 1,048.58
3 1,048.58 31.46 -6.29 1,073.74
4 1,073.74 32.21 -6.44 1,099.51
5 1,099.51 32.99 -6.60 1,125.90
6 1,125.90 33.78 -6.76 1,152.92
7 1,152.92 34.59 -6.92 1,180.59
8 1,180.59 35.42 -7.08 1,208.93
9 1,208.93 36.27 -7.25 1,237.94
10 1,237.94 37.14 -7.43 1,267.65
11 1,267.65 38.03 -7.61 1,298.07
12 1,298.07 38.94 -7.79 1,329.23
13 1,329.23 39.88 -7.98 1,361.13
14 1,361.13 40.83 -8.17 1,393.80
15 1,393.80 41.81 -8.36 1,427.25
16 1,427.25 42.82 -8.56 1,461.50
17 1,461.50 43.85 -8.77 1,496.58
18 1,496.58 44.90 -8.98 1,532.50
19 1,532.50 45.97 -9.19 1,569.28
20 1,569.28 47.08 -9.42 1,606.94

Total interest 758.67
Total Tax 151.73
Net 606.94

year o/bal Interst c/bal
1 1,000.00 30.00 1,030.00
2 1,030.00 30.90 1,060.90
3 1,060.90 31.83 1,092.73
4 1,092.73 32.78 1,125.51
5 1,125.51 33.77 1,159.27
6 1,159.27 34.78 1,194.05
7 1,194.05 35.82 1,229.87
8 1,229.87 36.90 1,266.77
9 1,266.77 38.00 1,304.77
10 1,304.77 39.14 1,343.92
11 1,343.92 40.32 1,384.23
12 1,384.23 41.53 1,425.76
13 1,425.76 42.77 1,468.53
14 1,468.53 44.06 1,512.59
15 1,512.59 45.38 1,557.97
16 1,557.97 46.74 1,604.71
17 1,604.71 48.14 1,652.85
18 1,652.85 49.59 1,702.43
19 1,702.43 51.07 1,753.51
20 1,753.51 52.61 1,806.11

Total Interest £806.11

MoneySaverLog

You're all assuming that the interest will remain at these levels for long periods of time, over time rates will go up and then it may be worth it having it locked in a ISA over time if you can pay the card back over the next couple of months or it's interest free.