Paying off a loan with a credit card

t_butler

Hi,

I have a couple of grand left on a loan with Hitachi Personal Finance. I have also just applied for a Tesco credit card with 0% on new purchases for 19 months, and been accepted. The credit limit on the new card is greater than the remaining balance of my loan. On the Hitachi website, it says that you can make payments or settle your loan with a credit card, for which they will charge a 2.5% fee. I could do with a few months break from my loan payments, so can I pay off the balance of the loan with the new credit card and, aside from the 2.5% fee for the payment, not incur any additional charges or accrue any additional interest as long as the balance is paid within 19 months?

In theory I know this makes sense but I'm wondering if there are rules against "paying off credit with credit", and whether I am likely to incur any charges on my card for doing this? I know that most credit cards incur additional charges for cash advances and gambling transactions - will I incur some sort of additional charge here for paying off a loan, or is there a chance of the new balance on the card being exempt from the 0% rate due to it not technically being a "purchase"?

Thanks in advance
Tom.

jonesMUFCforever

Basically you can't do it - they won't accept credit card payments because of the cost.
You will get charged 3% for a cash advance.
You need a card that will transfer money to your current bank account - then you pay off the loan.

t_butler

Thanks, but if they won't accept credit card payments, why explicitly state on the website that credit card payments are charged at 2.5% ? I know bank loans won't accept credit cards to pay loans, but my loan isn't really through a "bank"

bsms1147

Sounds like they'll do it. If so, your theory is sound.

DCFC79

t_butler wrote: »

Thanks, but if they won't accept credit card payments, why explicitly state on the website that credit card payments are charged at 2.5% ? I know bank loans won't accept credit cards to pay loans, but my loan isn't really through a "bank"

What does the contract for the loan say ?

t_butler

It says, under the heading 'charges for using a specific payment method', that credit card payments are charged at 2.5 % of the payment amount. I think this question was probably better suited to the credit card forum thinking about it, because I know Hitachi will accept a card payment, my main worry is whether my card issuer will pick up on the fact that I'm paying off debt rather than making a new purchase and apply some additional charges or not give me the 0% rate.

Nebulous2

I wouldn't do it, in case your credit card supplier regards it as a cash advance. I would say that is highly likely. They will then charge you a fee and charge you interest on the money.

It's a good idea to not to mix cash and purchases on the same credit card.

What about buying things you would normally pay for using your purchases credit card and using the money you have not spent to pay your loan?

I got a Santander 18 months 0% on purchases card and have been using it a lot, whilst saving the money to pay it off at the end.

t_butler

Thanks for that. That's what I was afraid of. It doesn't say anything in my credit card contract about this sort of thing, but I suppose it makes sense to play it safe and not risk my credit rating taking a bashing for a £2k cash advance, and incurring charges and interest.

AFK_Matrix

You could try doing it for a smaller amount and see what happens with the credit card. Then you only get charged a small fee and if no fee is charged then pay off the whole loan.

bargainbetty

By the way, you mention needing a break from your loan repayments - you don't get a break from monthly payments - you will still need to make monthly payments on the card. The offer rate will only last for the term offered if you make the monthly minimum repayments as laid out in the terms of the agreement.

You will probably get away with less, but you still have to pay something!

bsms1147

Nebulous2 wrote: »

I wouldn't do it, in case your credit card supplier regards it as a cash advance. I would say that is highly likely.

I would say it was highly likely it would count as a purchase.

But the only way to know is a small test payment, or to ask your credit card provider and get an answer in writing.