Transfer money before or after 0% finance card

elfed68

Hi, I've a HSBC credit card bill of £2800 and want to transfer the balance to a 0% card.

I've £1200 in cash to reduce this bill, do I put the cash in the HSBC card before transferring or after when the balance is on the 0% card.

I hope I've managed to explain that clearly.

Many thanks

Elfed

Scrounger

Invest your £1200 in a good savings account asap.

Do the 0% balance transfer to the new card and each month pay only the minimum payment (perhaps by direct debit). Just before the 0% deal finishes then use your £1200 + interest + any other spare cash to pay off as much as you can (or do a further BT to a new card).

However, if there's a fee for the BT it may be better to reduce the balance on your existing card prior to the transfer.

Is there a BT fee and if so, how much? Also, how long is the 0% offer?

Scrounger

elfed68

Hi, thanks for that, I thought it was best to clear credit card debt rather than have savings, but I don't really know or I wouldn't be asking on this.

So is it best to still save money in a savings account and just pay the minimum payment on the balance transfer?

I don't know what the transfer fee is as I haven't looked or applied yet.

Many thanks

grumbler

Generally, this depends on how long 0% deal lasts and on the fee you pay to transfer the balance.
If you can transfer the entire balance, the deal is long and the fee is small then you can make a small profit by keeping your cash in a good savings/current account.

However, as interest rates are miserable now, personally I wouldn't bother with savings and would just pay a part the debt off. If you pay it to the old card it doesn't make much difference whether you pay before or after transferring the balance to a new card.

YorkshireBoy

Is this £1,200 all you have in the world? If so, I'd imagine it's well short of the ideal 3-6 months net income rainy day fund.


What will you do if an unexpected bill comes in? It sounds like you're going for a BT card, which generally doesn't have an equal 0% on purchases period, so you can't use that without running up some interest at circa 17.9% APR. What if you need cash for something?


So, in many ways, it'd be better to save your £1,200 (by all means try and get some interest on it) for emergencies. After all, the 'cost' of this emergency fund is only (£1,200 x 3% £36, and the interest earned on the money (if you don't have any emergencies) will act to reduce this somewhat.


However, you do need some willpower. Do you have some?

F1F93

elfed68 wrote: »

Hi, thanks for that, I thought it was best to clear credit card debt rather than have savings, but I don't really know or I wouldn't be asking on this.

Depends on the interest rates. Sometimes it's better to be in debt but to have savings too. For example, I have a £1,500 0% overdraft. So I've put it into my Santander 123 account to earn 3% interest.

Total paid out due to interest = 0% x £1500 = £0.00
Total paid in due to interest = 3% x £1500 = £45.00 a year.

Obviously, in this case it's better to save rather than pay off the overdraft.




Your situation, however, involves slightly more complicated calculations. I'm happy to work it out for you, but I need to know:

The length of the 0% period,
The balance transfer fee,
Your savings rate AFTER tax.



But, as others have already said, it may be worth saving anyway to have a safety net if you don't already have one. Consequently, if you have a decent safety net, I'd just pay it off anyway as no matter where you invest the £1200, with today's savings rates it's not going to make too much of a difference after the BT fee, so you may as well reduce your debt.

Hope this helps .

YorkshireBoy

F1F93 wrote: »

I'm happy to work it out for you, but I need to know:

The length of the 0% period,
The balance transfer fee,
Your savings rate AFTER tax.

You'd also need to know the minimum payment percentage, which is especially important if, say, you're talking about 2.25% minimums and 29 months 0% duration with Barclaycard.


It's always good to exercise your brain, but I've found this purpose built calculator most useful...


http://www.stoozing.com/calculator/stoozcalc.php

elfed68

Hi, thanks for all your replies.

Unfortunately, due to a few emergencies this year, the £1200 is all I've left, and the credit card balance is also due to these emergencies. Things happen that are out of our control sometimes, so now I'm trying to reduce all this in a sensible way rather than enter panic mode and put money in the wrong place.
This debt wouldn't worry a lot of people, but it's caused me a few sleepless nights.

So if I'm reading things right it's best to transfer the credit card balance to the 0% card rather than reduce the balance with the £1200, and keep putting money aside to increase those savings.

The card I was looking at was the Tesco card with 0% for 28 months.

Scrounger

elfed68 wrote: »

So if I'm reading things right it's best to transfer the credit card balance to the 0% card rather than reduce the balance with the £1200, and keep putting money aside to increase those savings.

Yes, (as per post #2 paras 1 & 2).

elfed68 wrote: »

The card I was looking at was the Tesco card with 0% for 28 months.

Good choice.

Scrounger