Which is a better option? finanically and credit in future

davidm1

At the moment, i got £2350 (£2800 limit) cc debt 0% ending in Dec, £900(£1250 limit) 0% ending next May.
I got the money to pay off the debt now.

should i ...

1)apply for BT card (1 or 2 cards), BT both debt £3250 and carry on spending on Tesco 0% until next year?
2)Pay off the debt, carry on the Tesco 0%, and apply for new 0% next
3)or any better option

[Deleted User]

Hi, from personal experience i would pay it off now, and then just use the credit card and clear it every month.

Although it is tempting to keep it there in the 0% balance part and pay minimum every month, there is equally no real harm to just clearing the debt.

I don't think it will do any harm to your credit history to not pay off now, but if you BT the amount constantly it may be seen negatively.

Equally you could clear the debts, keep the better/longest running card and just use it normally. Thats what i have done, cleared debt on CC's instead of balance transferring them constantly, then just use one CC now, and my limit gets raised to highish levels.

I have gone from 5 CC's to two, with over £10,000 available limit, to one with over £5,000 limit which i use and clear every month. Ultimately lenders will like to see no debt and regular use of a cc but it being cleared.

HTH

CLAPTON

how much interest are you earning on the money
how does this compare with a new BT fee?

[Deleted User]

newbieboy wrote: »

Ultimately lenders will like to see no debt and regular use of a cc but it being cleared.

But the CC company won't.

CLAPTON

Bedsit_Bob wrote: »

But the CC company won't.

around about 50% of CC holders pay in full every month: they usually get offered the best deals

[Deleted User]

Bedsit_Bob wrote: »

But the CC company won't.

Lol

I'm thinking for future finances. Mortgage/Loans etc. don't keep debts you don't need.

Even with a 2% BT fee, your looking at a £65fee,

1% is £32.50
3% is £97.50

So, if you have BT before, did you incur a fee, if so add that to the fee you would incurr by BT again, on the amount, then see if the interest you could get on the savings exceeds it.

The CC company will want to keep you, to make money from you on interest etc. a Bt could net them £97, you paying it off in full now and every month will net them £0. Which do you think they prefer..

MisterMotivated

newbieboy wrote: »

So, if you have BT before, did you incur a fee, if so add that to the fee you would incurr by BT again, on the amount, then see if the interest you could get on the savings exceeds it.

A previous BT fee is somewhat irrelevant in this situation as, assuming there was one, it's already been charged. The OP has had since previous charge was added to earn interest on their equivalent balance in savings.

OP, the best option for you will depend on various factors as well as personal preferences. If you're just looking to maximise interest vs BT fees, it'll depend where you're planning to save the money and the BT fee applicable. If you're planning a house purchase or something in the near-ish future, it may be better to clear it to look more attractive to mortgage lenders. You may also find you are happier with no debts (I have about £5.5k stoozed at the moment, but sometimes feel like just getting rid of it altogether).

I'm in a similar situation as one of my 0% cc's is due to expire in November (~£2.1k). I have a calculator on a spreadsheet I use to see how much interest vs BT fee will be and when I'll "break even" (taking into account the decreasing balance). Normally I'd be tempted to BT to a long 0% card, but am planning to buy another house late next year and don't want the CC still hanging around. A shorter (15 month) card with small fee would see me break even in a few months, but the return isn't really substantial enough to tempt me as I'd be looking to clear it after about 10 months.

[Deleted User]

MisterMotivated wrote: »

A previous BT fee is somewhat irrelevant in this situation as, assuming there was one, it's already been charged. The OP has had since previous charge was added to earn interest on their equivalent balance in savings.

I agree it is somewhat irrelevant, my point was if your continuing to BT it and building up charges you should take this into account. You don't want to BT it, and then in 12 months, do the same thing but 'ignore' what you have spent previously. It is still a cost that you have incurred that had you cleared the debt you wouldn't incur.

3 x BT could incur £250 in fees say over three years, clearing it may only lose you £60 in interest of which you could build up savings again to mitigate this. Most savings account have fairly low interest rates at the moment, there not going to drop any lower so is it best to take the interest rate hit sooner rather than later (when they *could* increase).

Like you mentioned, if your long term looking to buy a house or anything, it is probably best to clear it and get it out the way.

I guess the main Q is, Do you feel comfortable having debt that you could get rid of?

MisterMotivated

newbieboy wrote: »

I agree it is somewhat irrelevant, my point was if your continuing to BT it and building up charges you should take this into account. You don't want to BT it, and then in 12 months, do the same thing but 'ignore' what you have spent previously. It is still a cost that you have incurred that had you cleared the debt you wouldn't incur.

Personally, I would ignore previous charges. If transferring for stoozing purposes, each 0% BT period should be looked at in isolation.

If, for example, the OP transferred 16 months ago, they've had 16 months to earn more interest on the debt than the original fee cost them. Whether they succeeded or not doesn't matter any more. If they transfer again next month, they have, let's say 24 months this time, to earn more interest than the new BT fee. OP could pay a BT fee of 2.4% and stooze the money in a FlexDirect account at 5% per year for those 2 years, netting approximately 3x the original fee in interest (assuming a switch to a new one after the first year to avoid pedantic comments about rate dropping after a year). What they did in the past makes no difference to this. Whether going for another BT or paying off the debt, the BT fee from 16 months ago has already been paid, end of story.

Building up savings to mitigate lost interest from stoozing is also irrelevant, as there's nothing to stop the OP saving new money alongside the stoozed debt.

Anyway, it seems we're agreed at least that the OP needs to decide for himself which option he feels most comfortable with. Given that the thread title mentions credit in the future, it seems we don't have all the facts to fully assess the situation. The whole thing might even be irrelevant if the OP gets turned down for new credit!