Credit card cash transfer

andyp2005

I have a question if you don't mind. I have a credit card with a high limit, they are offering me a cash transfer for 1.2% so my question is should I take the money out and put it into a 3-5% saving account then pay bank at the end with me keeping the interest?? Just don't know if I'm missing something. Thanks Andy.

Oakdene

I assume you mean they offering 0% interest on the transfer for x months?

andyp2005

Yes sorry, it's 0% for 24 months, there is a 1.2% one off fee so if I took out say £5000 they will charge me a one of £60.00

Ebe_Scrooge

If you're sure it's a cash transfer they're offering, whereby the cash is sent to your bank account, then yes it's a good idea. Just make sure you're not confusing it with a standard balance transfer, which is used to pay off a balance from a more expensive credit card.


The only other caveat - make absolutely sure to pay the minimum payment on time every month ( setting up a Direct Debit is the safest way ). If you miss a payment, the promotional rate will cease and you'll end up paying the standard rate of interest.

Oakdene

andyp2005 wrote: »

Yes sorry, it's 0% for 24 months, there is a 1.2% one off fee so if I took out say £5000 they will charge me a one of £60.00

So... to take advantage of this you would need to pay £210.83 a month to clear the debt to avoid interest charges at the end of the 0% period. However you could obviously then do a Balance Transfer onto a new card if you can find one offering a 0% deal at the end of the 24 month if you dont want to clear the whole amount in 2 years.

Ebe_Scrooge

Oakdene wrote: »

So... to take advantage of this you would need to pay £210.83 a month to clear the debt to avoid interest charges at the end of the 0% period.

Not necessarily. The OP only needs to pay the minimum payment every month to take advantage of the 0% rate ( leaving more in his bank to earn interest ). Then at the end of the promotional period, use the money he's got saved in the bank to pay the remainder of the balance in full, and pocket the interest he's earned.


This assumes one is disciplined enough to leave the savings in the bank for the duration, of course ! And it also needs you to make a note in your diary as to when the promotional rate is due to expire, and pay the balance off in full a few days before it finishes.


But you are correct in that there is always the option of switching the debt to another 0% card if one is available - obviously you'd need to work out whether the balance transfer fee makes it advantageous compared to what you can earn in interest.

Oakdene

Of course...

Also it would it be classified as savings & if so there could be tax implications on it...

bertiewhite

Is this what they mean by "stoozing"?

Ebe_Scrooge

Oakdene wrote: »

Also it would it be classified as savings & if so there could be tax implications on it...

Yes, you'll have to pay tax on interest earned ( assuming you're a tax-payer ). But pretty much every mainstream bank will take care of that for you ( you'll see on your statement something to the effect of "Interest paid after tax of £x.yy deducted" ). Indeed, when I set up my children's savings accounts, I had to go through a right rigmarole to stop tax on interest being deducted :mad:

molerat

Ebe_Scrooge wrote: »

Yes, you'll have to pay tax on interest earned ( assuming you're a tax-payer ). But pretty much every mainstream bank will take care of that for you ( you'll see on your statement something to the effect of "Interest paid after tax of £x.yy deducted" ). Indeed, when I set up my children's savings accounts, I had to go through a right rigmarole to stop tax on interest being deducted :mad:

Bank interest being taxed at source ceased in April

Ebe_Scrooge

molerat wrote: »

Bank interest being taxed at source ceased in April

Really ? Oh well, you live and learn ! Thanks for the info :T