Advice on 0% needed

Becks145

Hi
I cant decide what to do. I have a store card with £1226 on it. Currently paying the minimum every month and interest is costing me £23 a month. Should I go for a 0% for 9 months I've been offered and just pay it off?

[Deleted User]

What's the cause of your indecision?

If you can just pay it off, then do that.

If you can't, then a money transfer card at 0% would save you the interest while you're clearing it.

If you can't get a money transfer offer, then throw as much as you can at the debt.

Stuart_W

Presumably you're only paying the minimum because that is all you can afford and when you say "pay it off" you mean transfer the debt to the new account.

What does the 9 month 0% turn into after 9 months? If it's a really high APR and you have no other options open to transfer the debt it could cost you more.

What store card is it? Most balance transfer offers don't include store cards so you might need a money transfer offer. Next and very accounts can be paid with a 0% purchaeses card

Becks145

My car is all paid for so I'm looking to redirect that money. Not going to miss what I've not had for the last 5 years!!

Becks145

I'm just thinking the 0% would be quicker

[Deleted User]

That depends on how quickly you could pay it off with the cash in your bank account.

Stuart_W

What happens to the 0% after 9 months?

How quickly are you intending to clear the £1226?

If it's within the 9 months, or quite close, transferring should make a big difference.

What's the APR on the store card?

Terry_Towelling

If it comes to a choice between servicing a debt that accrues interest or servicing a debt that is interest-free, it will normally be a straightforward choice. From what you say of the interest you are paying it looks like your APR is currently around 20-25%.

There are however a few things to factor into the decision.

You need to find a way to get the debt from the store card to a credit card - Money Transfer is usually the route; Balance Transfer often fails with store cards.

Can you get a MT card with a big enough credit limit?

You need to find out whether there is a charge to make a Money Transfer - often is - could be up to 4%.

You need to understand whether you will be able to clear the debt before the end of the 0% offer. This could be important because the effect of the MT fee (if any) and the possibility of an even higher APR after the promotional period might make it undesirable or less advantageous.

You need to understand the minimum payment calculation method used by the credit card because that could affect affordability if you are only able to meet the minimum payments. That said, with a debt of only £1226 this is less likely to be a factor.

If you are looking to get a lower monthly repayment, this route might not do that for you but it should get the debt down more quickly. I'd also suggest that you pick an amount to pay each month (that you know you can afford and which is above the minimum) and pay at least that amount each month - don't pay the minimum because that will decrease each month as the outstanding balance decreases and you'll have more debt left over at the end of the 9 months than you would like.

That need not be a problem if you can find a 0% BT card to switch to - but you can't rely on this.

alpenwest27

All depends on how quickly you can pay off the £1226 - split into 9 is £136 per month, can you afford that? If not then what is the interest rate after the 9 months, you need to bear that in mind. As another comment has said if you're after a lower monthly repayment this may not be the best route....

PixelPound

OP mentions paying the minimum off only but has been paying car finance which has finished, so we need to know how much that is. Assuming it's enough to clear the debt within the 9 months, then the OP is wanting to know which is the cheapest method

The debt is £1226 so if OP has a card with a 0% MT let's say 4% fee then that will be £49.04. Let's say that the OP can clear in exactly nine months if the store card is 9.5% APR the OP will need to pay £141.67 pm and will incur £49.04 in interest charges. So if the interest rate of the store card is higher, then money is saved by doing the MT. Other permutations all depend on how much the car finance was per month and whether the total of that will be used to pay this off faster.

If the monthly payments will be lower than £141.67 then it's also about what the APR of the card will be afterwards.