Money Transfer Deal.. is this OK to do?

Polymorph

HI MSE's

I have a sizeable debt on a credit card that is split into 2 types of 0% rate. One that expires in January 2016 and the other that expires in November 2016. I have just logged onto my credit card portal and noticed that there is a money transfer offer for 0% until November 2016 (admin fee 3.5%) that I am wondering if I can take advantage of.... Can I do the following...

1: Pay off the amount that is about to expire in January from an account that I have cash in.
2: Do a money transfer back to the account that I just paid off from for the same amount.
The purpose is to get rid of the rate that expires in January giving me 0% until November.

the reason I don't want to pay off the amount owed is that I have just started contracting and although I am on a much better rate, I need a cash reserve to tide me over in between contracts. Getting the 0% extn will help reduce interest on the amount I owe.

Also I am not sure that I will easily get another credit card as most financial places - mortgages, loans etc don't want to know a new contractor, I'm told I need two years revenue before they will trust my earning potential.

I hope the above makes sense please ask questions, offer ideas if not !!!

Thanks for reading.
P

Candyapple

Yes.

Use the money transfer offer to send cash to your bank account and then just use that cash to pay off the amount of your balance transfer that is due to end in Jan 2016.

SeduLOUs

In theory your plan will work, but it seems quite a high fee for a relatively short 0% period. There's a small risk in that you want to pay off the balance first and then do the transfer - although unlikely the offer could be pulled from under you, so check the terms and conditions and if there is an expiry date on the offer or a limit as to how much you can transfer.

If your debt is 'sizeable' and not likely to be paid off by November, then it may be better to try for other balance transfer deals with a new card - some offer 32 months for under 2% fee.

Actually, scratch that. if you have the money available to pay off the card first, why not just pay the balance in full every month and spend on the card again and repeat? You won't pay any interest or transfer fees then?

Polymorph

Hi the reason I am reluctant to pay off in one go is that I need a buffer to live off in between contracts. I currently have a 3 month buffer and need to protect that. I realise this may not be the advised way to do things , but provided I can stay in a contract then I can payoff between 500 and a 1000 per month.. The alternative is that the min payments can be covered with the buffer... I will then be in a better position come November when the interest kicks in. Also I am not convinced that I will get another card at the moment because I have just started contracting and dont have a proven income over two years which seems to be the minimum period of time financial organisations are looking for...

adindas

Yes it will work. The only issue here i could see here is that the admin fee of 3.5% for just one year is quite high considering other possible alternative available on the market.

If you have a good credit file and likely t get a new credit card, the better option is to apply a 0% on Balance Transfer Credit card. Here is is the list of market leading BT credit card

http://www.moneysavingexpert.com/credit-cards/balance-transfer-credit-cards

From the link above, you see for instance Halifax, the first n the list, You just need to pay one off BT fee of 2.65% and you could leave your it for 37 months for 0% interest.

Other thing you might need to consider it that you might not get the limits you require to clear your balance on other credit card in full.

Polymorph wrote: »

HI MSE's

I have a sizeable debt on a credit card that is split into 2 types of 0% rate. One that expires in January 2016 and the other that expires in November 2016. I have just logged onto my credit card portal and noticed that there is a money transfer offer for 0% until November 2016 (admin fee 3.5%) that I am wondering if I can take advantage of.... Can I do the following...

1: Pay off the amount that is about to expire in January from an account that I have cash in.
2: Do a money transfer back to the account that I just paid off from for the same amount.
The purpose is to get rid of the rate that expires in January giving me 0% until November.

the reason I don't want to pay off the amount owed is that I have just started contracting and although I am on a much better rate, I need a cash reserve to tide me over in between contracts. Getting the 0% extn will help reduce interest on the amount I owe.

Also I am not sure that I will easily get another credit card as most financial places - mortgages, loans etc don't want to know a new contractor, I'm told I need two years revenue before they will trust my earning potential.

I hope the above makes sense please ask questions, offer ideas if not !!!

Thanks for reading.
P

SeduLOUs

I still think you'd be better off paying the card in full to be honest - why pay interest and charges on borrowing when you have solid cash?

Even if you wanted to keep a buffer to cover minimum payments, this would only need to 5% or so of the balance, and as the balance is being cleared the minimum payments would be either non-existent or negligible.

After the first round of clearing the card, you start building your funds in an interest bearing account. You only spend 'normal' spends on the card, and pay in full every month, but the cash you have to pay it off with is growing.

If you're saying you can currently afford to pay £500 off each month, then effectively it means you'll have £500 leftover after clearing the card in month one, £1000 in month two, etc and all of this money is then building you an emergency buffer and can be earning interest for you.

In the long term, you either keep using the card and paying off in full, or start to spend less on it each month so that it gradually disappears.