CC Newbie - how best to pay off 0% purchases?

Anandamide

I'm planning to make a few big purchases on a 0% interest card with a very low minimum payment.

I have been budgeting to pay off these purchases in a set amount of time (ranging from 6 months to a year); this seems the 'sensible' thing to do - pay it off as soon as possible and be done with it.

However I can't escape the niggling suspicion that I'm being a bit foolish, and that the clever thing to do is to pay off the absolute minimum for as long as possible before hopping to another card, reaping interest payments in my current account.

Am I right in thinking that this latter course of action is the most financially astute?

Of course, smart and sensible aren't necessarily the same thing. I accept there's a risk that if I miss a payment I'd end up in a slightly sticky situation.

Thoughts?

CLAPTON

Anandamide wrote: »

I'm planning to make a few big purchases on a 0% interest card with a very low minimum payment.

I have been budgeting to pay off these purchases in a set amount of time (ranging from 6 months to a year); this seems the 'sensible' thing to do - pay it off as soon as possible and be done with it.

However I can't escape the niggling suspicion that I'm being a bit foolish, and that the clever thing to do is to pay off the absolute minimum for as long as possible before hopping to another card, reaping interest payments in my current account.

Am I right in thinking that this latter course of action is the most financially astute?

Of course, smart and sensible aren't necessarily the same thing. I accept there's a risk that if I miss a payment I'd end up in a slightly sticky situation.

Thoughts?

in general, if you can make more interest in savings than you are spending on the debt , then that makes money for you.
Obviously you need to make sure you meet all the essential criteria to get the 0% on spending.

Hopping to a second card may make sense but usually there is a transfer fee which often nullifies the advantage


only other point is if you are planning to apply for a mortgage soon then best to clear the debts.

TheShape

What you have described is 'stoozing'. There is an entire forum thread about it.

As I have a number of current accounts that pay interest, I transferred my credit card balances to a no fee 0% balance transfer card. Virtually all of my new spending is done on a 0% purchases card with the intention to transfer the balance to a no fee 0% balance transfer card. I intend to do this indefinitely. There are plenty of no fee 0 % balance transfer cards available.

Always have a direct debit set up to ensure no missed payments.

It's best to avoid if you're planning to apply for a mortgage.

Just to add: Always ensure you have the means to pay of your balances in case you don't get a new balance transfer offer or your credit card provider reduces your limits.

Anthorn

No it isn't stoozing: The math is simple: You can make payments to the credit card regularly to pay off the purchases on time or you can save the same amounts in a savings account and earn interest on them. Then use the savings to pay off the purchases when due. That's what I do.

Note however that there will be a monthly balance and minimum payment even with 0% purchases.