Large purchase on 0% interest credit card

harrpau7

I will very shortly be making a purchase for several thousand pounds. I have the money saved up for it but I also now have a credit card with 0% interest for 12 months. Would it be best to pay for it on the credit card and then at the end of the 12 month term pay the credit card off rather than simply paying for the purchase now with the money directly from my savings? I am thinking if I pay with the money from my savings then I am going to lose the interest that I would gain from having it in my savings account (if that makes sense).

Any help/feedback would be brilliant, thanks.

opinions4u

Pay it on the credit card.

Meet the minimum monthly payments (plus £1) on the credit card.

Clear the full balance a couple of weeks before the 0% interest offer runs out.

harrpau7

opinions4u wrote: »

Pay it on the credit card.

Meet the minimum monthly payments (plus £1) on the credit card.

Clear the full balance a couple of weeks before the 0% interest offer runs out.

Why the extra £1?

What I was going to do was at the end of every pay period if I had any money left over from my monthly spends anyway so that come the end of the 12 months I had less to pay off anyway, but just curious.

Typhoon2000

Paying just the minimum on your credit cards is reported to credit reference agencies and might be viewed by other financial organisation that search your credit file as a sign of financial distress. Paying £1 extra rather than a larger sum is just to maximise the benifits of the 0% deal.

fozmcfc

I'm not sure if it shows on your credit report, that only minimum payment are being paid. Only paying the minimum payment, shows a sign of struggling to lenders.

If it isn't reported on your credit report, then in this case it makes sense to pay minimum payments and pay off other debts first or if no debts, putting as much as possible into your savings and paying it off before the 0%.

harrpau7

fozmcfc wrote: »

I'm not sure if it shows on your credit report, that only minimum payment are being paid. Only paying the minimum payment, shows a sign of struggling to lenders.

If it isn't reported on your credit report, then in this case it makes sense to pay minimum payments and pay off other debts first or if no debts, putting as much as possible into your savings and paying it off before the 0%.

Apart from the minimum balance I would easily be paying an extra £100 a month off, my initial plan was to do this until April, then I would get my yearly interest paid into my savings account, which would be about £300.

Would it be benifical to just carry on until the end of the 12 months 0% interest then and keep the money in my savings to gain interest for the next financial year then?

fozmcfc

I suppose it will depend on your situation, but I would definitely pay more than the minimum if it is reported on your credit report.

If it isn't, then it would depend how much extra interest you will lose out on, if you put extra towards the card, instead of putting it in your savings account.

If it is nothing, then it won't matter if you pay off more off the card and not put it in the savings.

When I have a 0% deal going, I try to pay more off, so at the end I don't end up having to pay out a huge lump sum.

A few years back I paid off more, while I had the cash, just in case, something happened and I had no cash to pay it off before the interest kicked in.

That of course is the main thing, that the whole balance is paid off and I would aim to pay it off by the 11th month or at least make 100% sure when the 0% runs out.

chanz4

even paying 1p more, it wont display a flag

harrpau7

fozmcfc wrote: »

I suppose it will depend on your situation, but I would definitely pay more than the minimum if it is reported on your credit report.

If it isn't, then it would depend how much extra interest you will lose out on, if you put extra towards the card, instead of putting it in your savings account.

If it is nothing, then it won't matter if you pay off more off the card and not put it in the savings.

When I have a 0% deal going, I try to pay more off, so at the end I don't end up having to pay out a huge lump sum.

A few years back I paid off more, while I had the cash, just in case, something happened and I had no cash to pay it off before the interest kicked in.

That of course is the main thing, that the whole balance is paid off and I would aim to pay it off by the 11th month or at least make 100% sure when the 0% runs out.

I would estimate I would be paying between £100 and £150 a month off the card until the 12 month 0% interest period is over, then would simply pay the rest off, which will be just under £4,000. So that's why I am wanting to know is is best to pay the £5,000 on the credit card and keep that amount in my savings account (and continue to add about another £400 a month to my savings account each month, with 2.8% interest) or should I just make the £5,000 purchase with my savings.

Any ideas what would be best?

Thanks again.

unimaginative_user_name

There are other advantages to paying with a credit card - loyalty rewards or cashback, plus section75 protection if something goes wrong.

harrpau7

unimaginative_user_name wrote: »

There are other advantages to paying with a credit card - loyalty rewards or cashback, plus section75 protection if something goes wrong.

Yeah that was another reason why I was going to use the credit card, but I was going to use the credit card then pay it off as soon as the statement came though.

Just want to know if I will be better off interest wise if I don't pay it off until the 11th month of the term that's all.