Credit cards over a loan

Terry_Towelling

robpost wrote: »

Terry not sure what you mean by whether you mean regardless if the balance is cleared or not. Why would there be interest if the balance is cleared?

If you take out cash on a card (which I believe is your plan for paying off another card) you are charged interest on the cash withdrawal from day 1 regardless of whether you clear the balance or not. It is only purchases that can benefit from interest-free borrowing.

redux

robpost wrote: »

As said before this is alternative solution...also not long term. I have invoices that will will clear the debt after 4 months. Just wanted to know if this is an option when there are no option to get the funds elsewhere...and see if there were anything else I'm missing...but so far the only thing I can see is the 3-5%per month. Not sure how negatively this would affect the credit score as its short term.

Surely 3 to 5% a month is more expensive than just leaving an amount on a single card, at maybe 1.5 to 2.5%

Or find some decent starter offers. For instance I have a card which started with 18 months at 0% on balance transfers and 9 months interest free on new spending. If I pay back £8-900 this June it needn't cost me any interest at all until next March (and actually that will be cleared as well). If you don't need a balance transfer to start with you can probably find longer periods at 0% on new spending.

Terry_Towelling

redux wrote: »

Surely 3 to 5% a month is more expensive than just leaving an amount on a single card, at maybe 1.5 to 2.5%

You would be right but I think that OP was looking for a short-term solution that would defer the debt without having to pay a penny of it until they were established financially in their business start-up.

Sadly, they overlooked the escalating (and compounding) effects of cash handling charges and interest meaning they'd run out of credit availability within a couple of months and have a far higher debt to service as a result.

Of course, the interest element on either card set could be minimised by transferring the debt very soon after the previous transfer but that would mean doing multiple transfers and incurring multiple sets of cash handling fees.

The plan to switch debt between cards can be made to work but avoiding the high costs that will result is not possible.

Using a 0% balance transfer card would avoid the interest and cash fees but you'd struggle to do that more than once or twice and you'd still need to meet minimum payments, which is what OP was trying to avoid.

Sorry, OP but it's back to the drawing board.

SnowTiger

robpost wrote: »

You would pay the credit cards in group A, with cash withdrawal at 3% of the cards B so every month you will be paying 60 for this to work.

The benefit of this over getting a Loan:
-no payment term times or early repayment dates.
-much easier to acquire than loans of the same amount - if I'm not mistaken
-credit score should increase whilst doing this

3% a month on credit card debt of £3,000 is £90 a month.

Usually, you pay interest on cash withdrawals from the day they're made and interest is (slightly) higher than interest on purchases.

Lenders and potential future lenders might not look kindly on giving you credit when they see you've made lots of cash withdrawals.

robpost wrote: »

As said before this is alternative solution...also not long term. I have invoices that will will clear the debt after 4 months. Just wanted to know if this is an option when there are no option to get the funds elsewhere...and see if there were anything else I'm missing...but so far the only thing I can see is the 3-5%per month.

Interest on credit card debit of £3,000 with an APR of 19.9% would be about £200 over a four month period.

Using your own figures and method, you'd pay £360 in cash advance fees, plus over £200 in interest on cash advances.

In your initial post you mentioned getting six credit cards. If you're able to do that, it seems likely you'd be able to get a single card offering an interest free period on purchases with a limit of at least £3,000.

Ben8282

This is a very silly and pointless idea.
Get one 0% money transfer card, transfer the amount desired (£3K) to your bank account.
Add to this an amount to cover the minimum payments for the 4 month period that you need the money for and a further amount to cover the money transfer fee.
Set up a direct debit for the minimum payment.
All done.
Say the fee was 3% and the minimum payment 1%. Transfer £3250. Fee would be £97.50 and the minimum payment would be £32.50 1st month decreasing slightly thereafter.

Terry_Towelling

At the end of the day, if OP is after a 'survival' budget (as he puts it) it is most likely that anything needed for such survival could be put on a credit card and so a 0%-on-purchases card would be far and away the best route - as alluded to by Snow Tiger.

No interest, no cash fees, no shenanigens at the ATM every day getting cash out. The only issue for OP would be the fact that he needs to meet the minimum payment each month (which was something he was trying to avoid) but, because he will only be adding to the card debt as and when he needs something, the minimum payment will not start out high but will grow monthly as the debt increases.

Add to that the fact that this is only a short-term issue and his maximum credit exposure is expected to be no more than £3K, he will only have to find a modest amount to meet those growing minimum payments. If he really is so skint that he can't afford to do that then he needs to think about cutting back a bit and delaying the business start-up for a month or so.

And let's not forget, OP's original rationale for this cards-based borrowing proposal was actually to create funding for those who can't get a loan. Those who have failed to get a loan and been forced down this route must have originally factored in the need to make loan repayments, so their business plan must have capacity to meet a minimum payment or two.

robpost

Not trying to avoid minimum payments at all. Want to pay the balance in FULL every month (including interest and fees) with credit on cards B. A is used, end of the month its paid off in full by B, end of next month and B is paid off in full by A...so on an so forth.

SnowTiger

robpost wrote: »

Not trying to avoid minimum payments at all. Want to pay the balance in FULL every month (including interest and fees) with credit on cards B. A is used, end of the month its paid off in full by B, end of next month and B is paid off in full by A...so on an so forth.

Well, you've obviously found a clever glitch in the system. Well done you!

Why don't you pop back in four or five months and let us know how it went for you?

redux

robpost wrote: »

Not trying to avoid minimum payments at all. Want to pay the balance in FULL every month (including interest and fees) with credit on cards B. A is used, end of the month its paid off in full by B, end of next month and B is paid off in full by A...so on an so forth.

I did this for a while 25 or 20 years ago, when on some cards it was possible to do a balance transfer by phone, pay it back by the due date on the following statement, and incur no fees or interest at all.

Thus it was possible either to do a 3 way revolve, 3 x 55 days, to cover 5 months free, or have 55 days on one card, skip to a week and a half on a card with maybe 6.9% apr, back to the first for another 55 days.

It's taking risks though, of making a slip-up in the timing, or being turned down next time, then the whole lot could run away.

I think the banks have caught on since then, hence a front fee for any balance transfers outside the initial promotional offers.

As already said, and you've accepted the point, interest starts straight away nowadays. So effectively you're likely to want to clear balances every 3 weeks, or on an ABAB sequence maybe every 2 weeks.

It's too complicated and expensive, so think again about finding a 0% offer, which could tide you over this period and perhaps (if necessary) another in the next few months too.

Terry_Towelling

robpost wrote: »

Not trying to avoid minimum payments at all. Want to pay the balance in FULL every month (including interest and fees) with credit on cards B. A is used, end of the month its paid off in full by B, end of next month and B is paid off in full by A...so on an so forth.

The point I was making about avoiding minimum payments was a reference to the fact that you have no desire, in the short-term, to actually reduce the debt, so a 0%-on-purchases card on its own (a reasonable solution) wouldn't fit your plan - you're just intent on swapping the whole debt (including fees & interest) over to a different card(s). We've already pointed out the escalating costs of 'balance-swapping-by-cash', that it would increase your debt by about £140 in the first swap and then a bit more than that in the second swap and so on, until you finally pay it all off with real money.

If you are happy with such an escalation in the debt and don't mind the inconvenience of visiting the ATM every day (do watch out for 'velocity checking' by your card issuers) then good luck to you. And, as Snow Tiger requested, please report back to let us know how much your scheme cost you in the final analysis.