Minimum Payments on 0% Balance Transfer

ermine

Mindfull wrote: »

I think this may be the charge for the balance transfer fee but will I now expect minimum payments each month on this even though it is a 0% card?

Crikey. Do you normally enter into binding contracts without paying attention to what you're signing up to or is it just this once

The need to pay down the balance from the off means that there is a lot of deliberately misleading stuff about BT cards.

For starters, it's not 0% - it is whatever the handling fee is, which you pay up front or risk paying interest on. A first guess would make the APR roughly the BT fee divided by the term of the loan (I know it's compounded, but BT rates are usually low enough for there not to be too much in it).

So you pay 3% hadling fee for a 0% loan for a year an a half and one would guess the real APR is about 2% (3%/1.5years)

But, the fact that you have to start repaying immediately means you don't have use of the full amount, so the effective APR is higher

And if you are boracic lint and need to borrow £1000 for a year, in your case you actually have to borrow £1000 +£1000*2.25/100*12 = £1270, roughly £270 of which you use to repay the repayments. It's not quite as much as £270 because the repayments fall, but it's a rule of thumb.

And make dead certain sure you repay all those repayments on time, and repay the principal at the end on time, because otherwise the 0% interest rate usually falls away and you get stung with a much higher APR for the rest of the loan. Which is how the CCs make their money, catching the unprepared out

andyfromotley

all in all its a good thing, you will pay down your debt MUCH quicker at 2.5%per month rather than 1% per month.

If you can overpay a little each month you will really see that balance tumble.