What would you do with debts?

TopCat1978

Hi All, I hope this is in the correct place.

We currently have £9,000 on a 0% credit card until November this year and we are saving (which we will achieve) to clear this in full at this time. However, I have just be accepted for a Barclays Platinum CC with a £14,900 credit limit and the 35 month 0% BT rate.

So what I want to know is which is best?

Option 1) should I pay off the balance and forget about the 0% BT rate? Then start replenishing our savings

Option 2) Transfer the balance and keep the cash in the bank (we have TSB accounts and Santander 123 account) to get a good rate of interest for the 35 months?

Option 3) Something different I haven't thought of.

Thanks in advance and sorry if this is asked all the time

Serendipitious

There will be a Balance Transfer Fee, I imagine, so you need to work out if the transfer will cost more than the interest on the savings account is giving you.

TopCat1978

Thanks S, the fee is 2.49% of the balance transfer but this is for 30 months 0% so only works out about 1% charge, compared to 3-5% return (before tax) so would be worth it from that perspective.

Just feels a bit too good to be true and whether there is a catch

Voyager2002

Topcat1978 wrote: »

Thanks S, the fee is 2.49% of the balance transfer but this is for 30 months 0% so only works out about 1% charge, compared to 3-5% return (before tax) so would be worth it from that perspective.

Just feels a bit too good to be true and whether there is a catch

Don't forget that each TSB account will only pay interest on the first 2,000 pounds. So you might have trouble earning enough on the money to cover the b/t fee.

TopCat1978

Voyager2002 wrote: »

Don't forget that each TSB account will only pay interest on the first 2,000 pounds. So you might have trouble earning enough on the money to cover the b/t fee.

Thanks Voyager, we have three TSB accounts, so £6,000 would be covered and then £3,000 in the Santander at 3%.

I think that would work. Just would need to make sure we don't spend it! :eek:

The alternative is to treat it like a loan and pay, say £300 per month, as a fixed sum off the card so it is gone in 30 months

Serendipitious

In that situation then, I'd do the BT, set up a DD for the £300 monthly, put the cards in the freezer and watch the CC balance drop nicely over the months.

Then you can look at your savings knowing full well that if circumstances change drastically for the worse, you have the funds to clear the debt.

So best not dip into the savings and also avoid any spending on the cards.

Kendall80

Topcat1978 wrote: »

Hi All, I hope this is in the correct place.

We currently have £9,000 on a 0% credit card until November this year and we are saving (which we will achieve) to clear this in full at this time. However, I have just be accepted for a Barclays Platinum CC with a £14,900 credit limit and the 35 month 0% BT rate.

So what I want to know is which is best?

Option 1) should I pay off the balance and forget about the 0% BT rate? Then start replenishing our savings

Option 2) Transfer the balance and keep the cash in the bank (we have TSB accounts and Santander 123 account) to get a good rate of interest for the 35 months?

Option 3) Something different I haven't thought of.

Thanks in advance and sorry if this is asked all the time

I'd choose Option 2.

Nuttydj

Topcat1978 wrote: »

Thanks S, the fee is 2.49% of the balance transfer but this is for 30 months 0% so only works out about 1% charge, compared to 3-5% return (before tax) so would be worth it from that perspective.

Just feels a bit too good to be true and whether there is a catch

Just to mention the 1% isn't directly comparable to the 3 to 5%, as the balance pays down over time. I.e. If you pay off in full over the 30 months then the average balance will be half what you pay the fee on (the full BT amount) and therefore working out the fee on the average balance it would be 4.98% which is a little less attractive at roughly 2% per year which compares to the 3 - 5 % in savings (before tax)

Edit: I still like the flexibility it offers me though!