0% Credit Cards vs Savings

neverdietagain83

We have just been given an amount of money that would clear our debts (very lucky people I know).

However, all our debt is across 3 0% credits cards and we have been transferring between cards for a number of years and slowly but surely reducing the balance.

Are we better off continuing to pay off the balances and transferring to 0% cards until we have paid it off and put the other money into savings? OR Pay off the 3 credit cards in full now?

If the suggestion is to put the money into Savings, other than an ISA, where else can the money be put to benefit from the highest interest but without being locked away.

Thank you in advance for your help,

Tixy

How long until the current set of 0% deals ends?

The third option may be to pay off the cards as and when the reach the end of the current 0%.

Stoozing can be a way of earning money - if the interest on your savings is higher than the transfer fees then it make may sense to put it in savings and keep tarting the card balances.
Some extra things to consider - will you be tempted to spend the savings? are you planning on applying for credit or a mortgage soon - as having outstanding credit cards debts could impact on you being accepted.

Rosco32

If I was in your position (congrats by the way) id pay them all off in full. I wouldn't want to be tempted to dip into it if I had it in savings, but that's just me lol.

neverdietagain83

The 0% deals vary throughout 2014.

We have thought about paying them off as they reach the end of the 0% deal but again, wanted to find out if we were better off keeping the money in savings.

The only reason we got into debt in the first place is through redundancy (on two occasions) and not because we waste our money. We need to keep an amount of money in easy access per month as with our current income we are not quite covering all our bills so we need to be able access it to just help on a month by month basis.

We are very very careful spenders because we have had to be and we never do anything unless we can do it on Tesco for free!

If we can put the money in savings for say 3 years and save more than the balance transfer fees then this would be preferable. We would not be tempted to dip into the money at all. I just don't know how I can work out which is the better option.

opinions4u

At current savings rates, balance transfer fees could easily exceed the interest you'd earn.

While you could make a small gain by holding the balance in a savings accout and then repaying each card prior to the 0% expiring I'd suggest clearing the debt and using the monthly payments you'd previously allocated to credit cards towards building up savings and investments.

Do you have a contingency fund in place? Get 3-6 months of net pay stashed away somewhere to provide a cushion for the next crisis, be it redundancy, illness or something else.

Have your pension contributions suffered? Time to make sure you're maximising any matching money from employers and perhaps do a bit more for yourselves.

msmyth18

Having a balance on the three cards may affect your credit rating, something to take into account

neverdietagain83

We haven't had a problem with credit ratings and we have a mortgage. We were going to pay off 1% extra this year from the money and see how we go.

M0ney

Bear in mind also if you have already done the balance transfer there is no way (that I'm aware of) to recoup the fee so if you have already done that you would be better keeping them on the credit cards at 0% only paying the minimum each month then paying them off as each 0% expires. I personally wouldn't do another balance transfer unless the fee was <2% and the term >12months.

Sharon87

Agree with above, keep it in savings until the 0% deals end, then pay them off. And after that start building up a savings account for emergencies.

All of my debts are on 0% and I'm starting to build up some savings specifically for paying them off.