Better to transfer or not?

no1gymbunny

I am not a mathematical genius and would like some help please!

I have a balance of £5,527.59 on a Barclaycard and I'm paying approx 20% apr. I have been offered a deal by Virgin (my balance with them is currently £0) of a rate of 10.9% until Sept 15. I've figured out that the transfer fee of 3.5% would be £193.46. Is it worth me transferring or not? The annual interest would obviously be lower, but with the transfer fee factored in as well, I'm not sure!

Any help would be gratefully received!

jo-bo

How much does your interest cost you a month at the moment and how much ado you pay towards this card?

eskbanker

It depends on how much you repay and when, but if you were to keep the balance constant at £5.5K then you'd save roughly £500 per year in interest (20% - 10.9% = 9.1% of the balance), which would more than offset a £193 transfer fee.

no1gymbunny

Thanks. The balance is currently on the Barclaycard which is costing 20% a year. I pay about £125/month for it, which is literally just above the minimum payment by a few quid! I can only really afford to make the minimum payments at the moment as I'm not working, but when I do get a new job, I intend to raise the payments. Trouble is, I've got a sizeable overdraft and various loans to deal with too!

eskbanker

Check what the minimum monthly repayment is on the Virgin card (others have been caught out when switching between cards), but you'll effectively have paid off the transfer fee in less than five months so after that you'll be ahead and should start to benefit from the lower interest rate and hopefully be able to afford to make bigger inroads into the debt itself.

Re overdraft and loans, you might want to list out (not necessarily on here) all your debts and the relevant interest rates in order to sort out how best to prioritise repayments, i.e. ensuring that you focus on reducing the debt at the highest rate (possibly the overdraft?)

no1gymbunny

Thanks. The minimum payment on Virgin is the greater of 1%/£25.

Re the other debt, I already have a spreadsheet of all the debt which details the interest rates, end dates, etc. Pretty scary reading and is more effective than cheese at giving me nightmares! lol As I'm out of work, I think that my priority is debt where I have a monthly commitment, ie loans/cards as I HAVE to pay these each month. I know that the overdraft is costing a bomb, but I don't have to commit to monthly payments on it. I realise that probably sounds mad, but that's my logic!

YorkshireBoy

no1gymbunny wrote: »

Thanks. The minimum payment on Virgin is the greater of 1%/£25.

It'll be nearer 2%, since it's 1% PLUS interest (of circa 0.84% at your 10.9% pa rate).

Still cheaper than Barclaycard though, at 2.25%.

no1gymbunny

Thank you! They don't make this easy/obvious, do they?!! I know, I know! That's how they trap you!