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Debt on 0% Card - Clear or Balance Transfer?

Hello,

I have a rather simple question that I can't find a direct answer for. I have £3400 of debt on a 0% credit card, the 0% expires next month so I want to deal with this. I have two options:
  • Balance transfer to a new 0% credit card. I am considering the HSBC card 0% for 24 months 1.4% fee (I already bank with HSBC)
  • Clear the debt using savings and close the credit card. This would require about half of my liquid savings.

Ideally I would like to keep my savings since I earn interest there and use it for other investments. Is there any major drawback to using the first option, assuming I am accepted for the HSBC balance transfer card? Apart from the 1.4% fee which is <£50 on the £3400 balance (I would earn more than this from interest on my savings.) Is it negative for my credit score if I have debt even if it is at 0% and I have the income/means to pay it off at anytime?

Comments

  • JimmyTheWig
    JimmyTheWig Posts: 12,199 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    What you are suggesting is called Stoozing. There's an article and whole sub-board for it here. Many of us do it.

    Lenders don't see a "credit score" per-se, but they see the info on your credit file. Are you planning on needing any significant credit (e.g. mortgage) in the next 2 years? If not, don't worry about it.
  • [Deleted User]
    [Deleted User] Posts: 35,242 Forumite
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    It's definitely be negative for your credit score, but that's ok. Everything's negative for your score.

    Lenders will see the debt and the fact it's at 0%. It'll be factored in for future lending as a commitment, but if they rest of your application stacks up, there's no real cause for concern.
  • Ebe_Scrooge
    Ebe_Scrooge Posts: 7,320 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    As above, transferring the balance would make sense in this situation, assuming the interest you earn on your savings will definitely outweigh the transfer fee.

    Just make sure you keep enough money in reserve to pay off any remaining balance when the promotional rate expires. You may well be able to do another transfer again if you wish, but there's no guarantee you'd be accepted so don't bank on being able to transfer.
  • shiny76
    shiny76 Posts: 548 Forumite
    Part of the Furniture 500 Posts Combo Breaker
    It's not a massive amount to have on credit cards at 0%. It's also worth assessing whether you'd be eligible for a 0% BT card with a 0% fee.

    In terms of eligilibilty for credit in the future then that would depend on a number of factors such as credit history, income/affordability as well as existing debts.
  • BISCUIT1
    BISCUIT1 Posts: 105 Forumite
    Ninth Anniversary 10 Posts Name Dropper
    I would perhaps pay some (half off?) and see about balance transferring the remainder on to a no fee 0% card so you have the best of both worlds... :)
  • toshi
    toshi Posts: 308 Forumite
    Part of the Furniture 100 Posts Combo Breaker
    If you intend to do stoozking, checked out.

    http://www.stoozing.com/calculator/stoozcalc.php

    If you transfer to HSBC 0% transfer with 1.4% for 24 month, Monthly repayment 2.5% and save the stoozing debt fund to 1.5% saving account, then you would receive £30 interest before tax, something like that. You can get some idea and make a plan.
  • Candyapple
    Candyapple Posts: 3,384 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    Assuming you have no upcoming major life events such as getting a mortgage in the near future, I would probably just shift the debt onto a zero fee BT card:

    https://www.moneysavingexpert.com/credit-cards/balance-transfer-credit-cards/#nofee

    Why pay a fee if you don't need to? Tesco and Barclaycard have always given me high limits. You have also just missed out as Santander used to offer 26 months at 0% no fee but it looks like they've dropped it to just 18 months now.
    I'm a Board Guide on the Credit Cards, Loans, Credit Files & Ratings boards. I'm a volunteer to help the boards run smoothly, and I can move and merge threads there. Any views are mine and not the official line of moneysavingexpert.com
  • Thanks for the advice all. I have no major credit requirements expected over the next two years, I am already mortgaged and have a car loan. I will look into the 0% BT cards and probably do the transfer and just chip off the minimum each month.
  • Just to add to the above post about 0% BT cards, I just got a Tesco card with 0% transfer fee for 20 mnths and CL of £3800.

    By the sound of it, I have more credit commitments than you and didn't expect more than about £2000. Hopefully you'll get enough to cover you!
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