Loan vs 0% Switch Credit Cards

fd1972uk

Hi,

Currently working at tackling the Visa card debt and just wondering what people's thoughts are on this.

We run a few Credit Cards, although only for 0% Balance Transfers. With the exception of that I have a rewards Card (just moved to Santander due to better rates than MBNA card) but this is fully paid off so not to gain interest.

We run the 0% from 3 different cards which is a bit of a pain, one runs out this September, one runs out Feb 15 and the other around October 15.

Obviously moving these will mean admin fees to do so and if based on £7.5k of credit card fees would be around £225 or therabouts, obviously that would drop with each respective year but would still amount to several hundred pounds.

We budget around £200 per month for credit cards, if an emergency has came up or such then we've reduced the payments but still paid something towards it, but have tried to stay faithful to the £200 per month.

There are a few things that I can contribute to the credit card debt but these are not guaranteed so I'm not budgeting for it.

Going by the £200 per month we would be out of the credit card debt by around July 2017.

Now I do Surveys which earn maybe a £200-£300 per year, also cashback can possibly amount to a couple of hundred pounds also, but as said no guarantees.

Also I have a car and take a colleague to work and back which he contributes £60 per month, this is another figure I plan to use against debt. I'm also in process of changing cars to more economical car which could benefit me around £50-£60 per month, also saving stuff like upcoming bills (know I need brakes etc) and also MOT etc.

Also awaiting air delay claim which could result in a payback of around £1200 if successful (that would incl. paying off fees). But once again, no guarantee and not budgeted for.

However I'm wondering if a loan maybe the way, I can possibly apply for a 4.5% loan and see how it goes, but I do know that I have a guaranteed 6.4% loan. This would be £229 per month for 3 years. So that would mean paying off around May/June 2017.

Wondering if this is the option, getting rid of the various visa cards and that would mean laying low for a few years, benefitting from the car money, cashback and surveys giving us extra emergency funds, holidays would probably be out unless covered by the money we have.

It would mean we would have to live within the budgets we have, obviously the 0% benefits amd can allow for a lower payment at times, but maybe the loan gives us a more rigid budget to work from as the money is already spent.

We'd be credit card debt free sooner going by my calculations if we stuck to £200 and come October 2018 the other Loan we had will be clear too, meaning we'll benefit to the tune of nearly £550 per month. (The October 2018 loan was a reduced APR loan we took out over another loan, with the same end date).

Sorry for rambling on, anyone any thoughts?


FD

grumbler

I think you over-complicate a simple question by loads of absolutely irrelevant details.

Loan is obviously simpler, but 0% CCs are cheaper unless you are going to pay the debt off very fast.

I think you can use this calculator to compare a BT with a loan:
http://www.stoozing.com/calculator/balance-transfer-calculator.php

fd1972uk

LOL, yeah, sorry I did ramble. Although was maybe expecting the "Is there other sources of income you can help towards the debt" response, LOL.

Thanks for that link.

Whilst it may well be doubtful on reading up it's also pointed out that using 0% could be removed at any time should CC companies wish, although as I said probably doubtful but a consideration nonetheless.


FD

Mr_Goodkat

As long as you meet at least the minimum payments on time then your 0% credit card deal will not be removed.


The 0% credit cards are the best option rather than an interest paying loan even after factoring in the balance transfer fees


I would use your £200 a month to pay minimum payment plus £1 on two of the cards and through the remainder at one card plus any over payments you can manage.

fd1972uk

Sorry what do you mean £1 on two of your cards? Not following that.

Basically as it stands £200 is going on the debt, split 3 ways, if I can sometimes manage a bit more will do it, but no guarantee. £200 is the amount.

As for removing 0%, I don't mean on my current deals, I mean in general to all 0% cards, in case they just stop offering it to anyone, not just me.


FD

Mr_Goodkat

fd1972uk wrote: »

Sorry what do you mean £1 on two of your cards? Not following that.

Basically as it stands £200 is going on the debt, split 3 ways, if I can sometimes manage a bit more will do it, but no guarantee. £200 is the amount.

As for removing 0%, I don't mean on my current deals, I mean in general to all 0% cards, in case they just stop offering it to anyone, not just me.


FD

On two of the cards pay £1 more than the minimum payment (this means these won't be reported to the CRA's as paying only the minimum payment, minimum payment flags can be scored negatively by banks etc as it is a sign of financial distress).


On the third card pay the rest of what you have to throw at debt that month.


This will help you clear one of the cards quicker and means it will mean less shuffles and less balance transfer fees than chipping away at three cards at the same time.

fd1972uk

Ahhh, thanks for that, oh dear, wasn't aware of that, although it probably hasn't happened. Although granted, not sure before.


FD

grumbler

fd1972uk wrote: »

Although was maybe expecting the "Is there other sources of income you can help towards the debt" response, LOL.

For this try Debt-Free Wannabe and Boost Your Income boards.

...it's also pointed out that using 0% could be removed at any time should CC companies wish,

This is incorrect. There are the T&C binding for both your and the CC company.

nigelpm

Mr_Goodkat wrote: »

On two of the cards pay £1 more than the minimum payment (this means these won't be reported to the CRA's as paying only the minimum payment, minimum payment flags can be scored negatively by banks etc as it is a sign of financial distress).

Really interested in this point as it's not something I've ever seen mentioned on a forum or by my friend who works for one of the major banks and deals with consumer credit risk.

So the question is where has it come from?

grumbler

nigelpm wrote: »

... it's not something I've ever seen mentioned on a forum or by my friend who works for one of the major banks and deals with consumer credit risk.

MSE article: Credit Scores

In 2008, the depth of 'full data' that credit card companies share about you increased. Barclaycard, Capital One, GE Money, HBOS and MBNA now share the amount you repay (if it's the minimum, or if you repay in full) and whether you've a promotional deal (plus if you use credit card cash advances, which you NEVER EVER should).

http://www.experian.co.uk/downloads/consumer/YCREJul08.pdf

See p.15 - Payment code.

Your friend seems to have a lot to learn - like many other people working for banks.

nigelpm

grumbler wrote: »

MSE article: Credit Scores http://www.experian.co.uk/downloads/consumer/YCREJul08.pdf

See p.15 - Payment code.

Your friend seems to have a lot to learn - like many other people working for banks.

And where does it specifically state your assumption that :

" minimum payment flags can be scored negatively by banks etc as it is a sign of financial distress"

Banks use extremely detailed and complex modelling - I'd be quite surprised if the above was considered when a large number of people stooz and always pay the minimum balance