Maximising use of 0% on purchases

pollyanna24

I have just acquired a 0% on purchases for 27 months credit card from the Post Office with a limit of £4,500.

I was planning on using it for everything I buy and then using what I have in my current account to overpay on the mortgage. I get that the danger here is roll forward 27 months and I have £4,500 on my credit card which is then suddenly not 0%.

Trying to find a happy medium where I can leave myself with enough time to pay off the credit card.

I quite like the idea of overpaying on the mortgage which I pay interest on and having the 0% on a credit card though.

Cycrow

The problem is if you use the money to over pay the mortgage, then after the 27 months you wont have the money available to clear the debt, and end up paying much more interest on the credit card.

The better way would be to put the money you spend on the card into a savings account so it can earn interest. Then after the 27 months, you simply use the money you have saved to pay it off

pollyanna24

Cycrow wrote: »

The problem is if you use the money to over pay the mortgage, then after the 27 months you wont have the money available to clear the debt, and end up paying much more interest on the credit card.

The better way would be to put the money you spend on the card into a savings account so it can earn interest. Then after the 27 months, you simply use the money you have saved to pay it off

Yeah, I guess this is the kind of thing I'm worried about. Have no idea why it didn't occur to me to put it in a savings account.

I am planning on overpaying the mortgage by about £100 a month anyway. I guess what I had in mind was using the money that I spend on the cc which will still be in my account to overpay the mortgage and then using the £100 to pay back the cc. I now realise I was hugely overcomplicating it! Will just set up another savings account with the highest rate of savings. Will head off to the savings board now to find out what this is.

JimmyTheWig

I can think of four ways to make it work against a mortgage...

1. With an offset mortgage where you pay the money into a linked savings account.
2. With a mortgage where you can get your overpayments back at a later date (though I'd be concerned about terms and conditions that might mean you couldn't).
3. If your mortgage only has 27 months left to run. Pay off the mortgage now and rather than pay the mortgage off each month pay the minimum on the credit card and pay the rest into savings. Once the 27 months is up use the savings to pay off the credit card.
4. If you currently overpay your mortgage by £170 a month. Pay the money off the mortgage now and stop the monthly overpayments. Use what would have been the monthly overpayments to pay the minimum on the credit card and put the rest into savings. At the end of the 27 months use the savings to pay off the credit card and reinstate the monthly mortgage overpayment.

I accept that most people's mortgages won't fall into any of these categories.


With savings interest now (mostly) paid tax-free I'd have thought it was just as profitable to do as Cycrow suggests and pay the money into a savings account and leave the mortgage alone.

JimmyTheWig

Pah! Cross posted!

pollyanna24 wrote: »

I am planning on overpaying the mortgage by about £100 a month anyway. I guess what I had in mind was using the money that I spend on the cc which will still be in my account to overpay the mortgage and then using the £100 to pay back the cc.

JimmyTheWig wrote: »

4. If you currently overpay your mortgage by £170 a month. Pay the money off the mortgage now and stop the monthly overpayments. Use what would have been the monthly overpayments to pay the minimum on the credit card and put the rest into savings. At the end of the 27 months use the savings to pay off the credit card and reinstate the monthly mortgage overpayment.

I accept that most people's mortgages won't fall into any of these categories.

pollyanna24

JimmyTheWig wrote: »

I can think of four ways to make it work against a mortgage...

1. With an offset mortgage where you pay the money into a linked savings account.
2. With a mortgage where you can get your overpayments back at a later date (though I'd be concerned about terms and conditions that might mean you couldn't).
3. If your mortgage only has 27 months left to run. Pay off the mortgage now and rather than pay the mortgage off each month pay the minimum on the credit card and pay the rest into savings. Once the 27 months is up use the savings to pay off the credit card.
4. If you currently overpay your mortgage by £170 a month. Pay the money off the mortgage now and stop the monthly overpayments. Use what would have been the monthly overpayments to pay the minimum on the credit card and put the rest into savings. At the end of the 27 months use the savings to pay off the credit card and reinstate the monthly mortgage overpayment.

I accept that most people's mortgages won't fall into any of these categories.


With savings interest now (mostly) paid tax-free I'd have thought it was just as profitable to do as Cycrow suggests and pay the money into a savings account and leave the mortgage alone.

Might have to read through this post a few times to understand it properly.

The mortgage I overpay (as I have two) is an old Nationwide mortgage where you can claim back overpayments (they say without question) and so far I have £60,726.23 in overpayments (owned the house with my brother for 5 years and we did got a bit mad in the overpaying). However I know I could claim the £4,500 back in 27 months time (if it is as easy as they say it is), pyschologically I feel this would be going backwards the mortgage amount would go up again.

I have opened up a Nationwide 5% account which is for one year. Have transferred what I have spent on the credit card so far and (hopefully) will be able to take money out of it when the Post Office demands a minimum payment every month.

JimmyTheWig

pollyanna24 wrote: »

Might have to read through this post a few times to understand it properly.

Let me know if there's anything that you want me to explain.

I have opened up a Nationwide 5% account which is for one year. Have transferred what I have spent on the credit card so far and (hopefully) will be able to take money out of it when the Post Office demands a minimum payment every month.

In which case, unless you are paying more than 5% interest on your mortgage then I'd concentrate all money on maxing out this account.

pollyanna24

JimmyTheWig wrote: »

Let me know if there's anything that you want me to explain.


In which case, unless you are paying more than 5% interest on your mortgage then I'd concentrate all money on maxing out this account.

I think I understand it all.

I can't believe I've been missing this trick for years! I'd heard of stoozing, but always assumed it meant having to have cash up front. Oh my lord, I am going to be doing so much research now on other ways to money, haha!

My mortgage (that I am overpaying on) is 2.5%. The Nationwide savings account is 5% for 12 months and I think I can put £500 a month into it. The odds are I will be spending more than this on the cc, so I might have to open another bank account to put savings into.

So, as my credit limit is £4,500, when I am getting close to that amount, I simply apply for another 0% on purchases credit card?

JimmyTheWig

pollyanna24 wrote: »

I think I understand it all.

Cool. But from what you've since said about your mortgage rate, forget paying the money off the mortgage.

I can't believe I've been missing this trick for years! I'd heard of stoozing

Ahh, well I'm one of the smug ones who was doing it before I heard anyone else suggest doing it.
But if it's any consolation, until a couple of years ago it had pretty much been off the menu for a good few years.

The Nationwide savings account is 5% for 12 months and I think I can put £500 a month into it. The odds are I will be spending more than this on the cc, so I might have to open another bank account to put savings into.

Yep, so put the maximum into the 5% account then the rest into the best rate you can get elsewhere.

So, as my credit limit is £4,500, when I am getting close to that amount, I simply apply for another 0% on purchases credit card?

Yes, that's a reasonable plan.
Or it might be worth asking for a credit limit increase once they've seen you paying on time for a few months.

And then in 27 months time (well, 25 is probably safer), you can apply for a 0% Balance Transfer card and move the balance to the new card, keeping the money in savings.
Remember that you can't guarantee that deals around now will be available in two years time, or that you'll qualify for them. So best to use savings accounts where you could pay off the balance at the end of the 0% deal if needed.


The other thing to consider is how this affects your credit report.
For many people it helps. It sees that you can cope with high balances on a credit card and still pay on time.
But it is often documented that too many credit searches in a short period of time can be harmful.
Also, having outstanding credit card balances will act against you with other lenders.
So you need to consider what your near future credit requirements are. If you are looking to get a new mortgage, for example, then you may want to hold off until that has completed.

pollyanna24

JimmyTheWig wrote: »

Cool. But from what you've since said about your mortgage rate, forget paying the money off the mortgage.


Ahh, well I'm one of the smug ones who was doing it before I heard anyone else suggest doing it.
But if it's any consolation, until a couple of years ago it had pretty much been off the menu for a good few years.


Yep, so put the maximum into the 5% account then the rest into the best rate you can get elsewhere.


Yes, that's a reasonable plan.
Or it might be worth asking for a credit limit increase once they've seen you paying on time for a few months.

And then in 27 months time (well, 25 is probably safer), you can apply for a 0% Balance Transfer card and move the balance to the new card, keeping the money in savings.
Remember that you can't guarantee that deals around now will be available in two years time, or that you'll qualify for them. So best to use savings accounts where you could pay off the balance at the end of the 0% deal if needed.


The other thing to consider is how this affects your credit report.
For many people it helps. It sees that you can cope with high balances on a credit card and still pay on time.
But it is often documented that too many credit searches in a short period of time can be harmful.
Also, having outstanding credit card balances will act against you with other lenders.
So you need to consider what your near future credit requirements are. If you are looking to get a new mortgage, for example, then you may want to hold off until that has completed.

Gosh, you're a genius, haha! Going to look into matched betting next!

JimmyTheWig

pollyanna24 wrote: »

Going to look into matched betting next!

You'll be one up on me if you do...