Could I ask a little advice on shifting debt around?

Sandy.l_2

Hi everyone, I'm quite new to this forum but I'm enjoying all the money-saving ideas. I wondered whether I could ask a little advice.

Our current situation is like this:
We have a total of £3500 owing on two Lloyds overdrafts (Platinum 2K & Budget 1.5K) when they are maxed out.
We owe about 10k to MBNA (17k credit limit)with various interest rates (min 12.9%)
I have a clear Barclaycard with £10k credit limit with option to transfer up to 5k at 6.9%
Husband has just secured a £9300 credit limit on the Halifax One with 0% transfers & purchases for 9mths

It makes sense to me to redistribute the £10k debt over the two cards but would you also try and get the overdraft amounts on to the credit cards? This would mean withdrawing cash from a CC which just sets the ball rolling again. We did wonder whether to pay off both overdrafts with the MBNA. Then we could transfer maximum amount (90% or £8370) to Halifax One card and then remainder to Barclaycard. This would mean we would have the initial charge for the MBNA cash withdrawal/transfer but we could avoid the long term interest rate by switching the debt.

Does this make sense or should I tackle it another way?

Hope someone can help & thanks
Sandy

immoral_angeluk

Could you let us know the APR's on the overdrafts?
Also what will the APR on the new card be after the 9 months interest free?

Sandy.l_2

Thanks for your reply. The Overdraft charges are 11.9%. The Halifax will change to 12.9% after 9 months, but we'll be happy to switch again when the times right!

Thanks, Sandy

tomterm8

Sandy.l wrote: »

It makes sense to me to redistribute the £10k debt over the two cards but would you also try and get the overdraft amounts on to the credit cards? Sandy

My instinct says NO. You've got to remember that there is a balance transfer fee (maybe 2.5%) and a cash withdrawl fee (2.5%?) and that after the date you've got the 6.9% interest on the full ballance including the fees. It does depend if the 6.9% is for the full life of the debt, in which case it might be worth it... if you're not going to be able to pay off the debt for an extended period, and the 6.9% is for the full life of the balance transfer.

Sandy.l_2

tomterm8 wrote: »

My instinct says NO. You've got to remember that there is a balance transfer fee (maybe 2.5%) and a cash withdrawl fee (2.5%?) and that after the date you've got the 6.9% interest on the full ballance including the fees. It does depend if the 6.9% is for the full life of the debt, in which case it might be worth it... if you're not going to be able to pay off the debt for an extended period, and the 6.9% is for the full life of the balance transfer.

I'm glad I asked now, it's all so confusing!

The 6.9% is for the full life of the transfer. Would this now make it a consideration?

Thanks for your help
Sandy

CLAPTON

firstly you should look up the details of these cards.
what is the BT fee,
what are the T&Cs of the 6.9% deal.
what is the cash withdrawal fee,
what is the cash interest rate?
if you want to move money around you need to know all these things

however i would guess:

i would suggest you BT as much as allowed from the MBNA card to the Barclaycards 6.9% assuming that it is a LOB and the BT fee is reasonable and there are no other restrictions.
Obviously you will not use this card for anything else.

And BT the remaining MBNA to the 0% Halifax one.

There is no point in getting cash out of the Halifax card to pay off the overdrafts because you will pay a cash withdrawal fee and the cash interest rate will not be 0% but will probably be very high ... look these up.

if the Halifax is also 0% on purchases you could consider simply using the card for spending and reducing the ODs in that manner.

However with 13,000 of debt you should be considering ways of reducing spending and clearing this debt rather than moving it about.

tomterm8

Sandy.l wrote: »

I'm glad I asked now, it's all so confusing!

The 6.9% is for the full life of the transfer. Would this now make it a consideration?

Thanks for your help
Sandy

Basically, according to my back of the envelope figures:

assumptions: to take out the money from your credit card will cost you money up front (I think 2.5%) and then transfer it to a new card will cost you more money(I think 2.5%) and assuming you are able to transfer the money to a 6.9% card

results:
1. assuming you make no payments on the debt, it will take at least 12 months before you are saving any money.

2. Since you will be making some repayment, it will take longer than 12 months before you save any money

So it depends if you will have to keep this debt for longer than 12 months and , in any case, you will save more money transfering balances from existing cards debts to new credit cards before even considering transfering an overdraft.

Sandy.l_2

CLAPTON wrote: »

firstly you should look up the details of these cards.
what is the BT fee,
what are the T&Cs of the 6.9% deal.
what is the cash withdrawal fee,
what is the cash interest rate?
if you want to move money around you need to know all these things

however i would guess:

i would suggest you BT as much as allowed from the MBNA card to the Barclaycards 6.9% assuming that it is a LOB and the BT fee is reasonable and there are no other restrictions.
Obviously you will not use this card for anything else.

And BT the remaining MBNA to the 0% Halifax one.

There is no point in getting cash out of the Halifax card to pay off the overdrafts because you will pay a cash withdrawal fee and the cash interest rate will not be 0% but will probably be very high ... look these up.

if the Halifax is also 0% on purchases you could consider simply using the card for spending and reducing the ODs in that manner.

However with 13,000 of debt you should be considering ways of reducing spending and clearing this debt rather than moving it about.

Yes I agree. We have made some inroads into the reasons we have overspent and I have spent the last couple of months working out realistic budgets for living expenses and testing them out. They really are working now. We have a ridiculously large mortgage which scares me. The only way we can sort that is by moving and believe me that will be happening most likely next year. I just thought it would be a good idea to start on a fresh footing with the bank accounts as I'm constantly robbing peter to pay paul. With a clear account I could allocate funds much better.

I like your suggestion of transferring as much as possible to the Barclaycard. I hadn't thought of it this way round. This would free up 0% spending (budgeting spending of course!) while we clear the overdrafts.

Thanks for this!
Sandy

Sandy.l_2

tomterm8 wrote: »

Basically, according to my back of the envelope figures:

assumptions: to take out the money from your credit card will cost you money up front (I think 2.5%) and then transfer it to a new card will cost you more money(I think 2.5%) and assuming you are able to transfer the money to a 6.9% card

results:
1. assuming you make no payments on the debt, it will take at least 12 months before you are saving any money.

2. Since you will be making some repayment, it will take longer than 12 months before you save any money

So it depends if you will have to keep this debt for longer than 12 months and , in any case, you will save more money transfering balances from existing cards debts to new credit cards before even considering transfering an overdraft.

Yes you're right, it doesn't make any savings in the long run does it. The figures are more like 3% anyway.
Back to the drawing board for me.

Thank you for your suggestions so far, they have given me real food for thought.
Sandy