Mortgage vs 0% credit card

Lornaloo

Hi,
I am after some advise.. I have £95,000 remaining in my mortgage and I am keen to pay it off ASAP. I am currently overpaying which takes the term to two more years. However, I'm wondering whether I should get a 0% on purchases credit card to use for my food shopping and everyday spending so I can then over pay a bit more each month and then pay of the credit card at the end of the restricted time, presently 23months with virgin. Any advise greatly appreciated!

TheDebtinator

If you're paying all of your spare money to the mortgage company, how do you intend on paying off what could be a substantial credit card balance at the end of a 0% period?

Mirno

I presume the plan is:
#1 Buy normal shopping on the card, use the money saved to over pay (along with current overpayments)
#2 At some point, stop all overpayments to the mortgage, putting it all into the highest interest bank account you can find.
#3 A few days before the 0% deal ends, use the money from #2 to pay off the lot.
#4 Carry on over payments as you were before this endeavour.

This will get you slightly further along your way to being mortgage free, but requires discipline. It also, probably won't make much of a difference, as your mortgage interest is likely to be low.

If, for example, you have a mortgage rate of 3%, a current over payment of £300 a month, and a shopping bill of £100 a month. You'd switch to over paying £400 for 9 months, and nothing for 3 months (as you saved to cover your CC bill).
This would save you a total of £13.45 compared to the constant £300 + £100 for shopping. This didn't take into account minimum payments, which would lower the saving slightly (you'd have to pay say £5 a month to the CC, so £395 + £5 for 9 months)...

If your plan would be to then move the debt to another 0% card, you need to consider the balance transfer fee, if this is greater than your mortgage this would cancel out any savings...

TheDebtinator

there isnt much chance of earning interest in a high interest account if you do not leave it there for very long, so that would defeat that object. Seems a bit of a hassle for very little gain imo.