Credit advice needed

Marksie25

Hi all,
I would really appreciate it if someone could look over my post and check that I am not over looking anything that could cause me problems in the future. I have avoided credit cards all my life but due to an unexpected large payment that I couldn't cover I took one out.

The card I applied for has 0% interest for 20 months on balance transfers and money transfers with a initial transfer fee of 2.9%. I thought this would be cheaper than taking out a bank loan due to the 20 months 0% APR. I was given a credit limit of £5000 and the current balance is around £2000. I also have a couple of finance agreements with different companies and until now didn't pay any attention to the APR. One is for £329 at 14.9% APR and the other is £1128 at 19.9%.

Do you think it would be advisable to transfer the finance agreements to this card in order to take advantage of the 0% APR? I feel like this would be a good option for me as all my debt would be with one company and easier to manage.
My monthly wage can vary a lot from month to month so one month i may be able to pay as much as £500 but the next month i might have to pay minimum payment. This worries me as i may be missing something important. In the terms of my loan it says the following about the minimum payment:

Each month you must pay at least the Minimum Payment in pounds sterling as shown on your statement.
This will be the greater of:
> £25, or the whole balance shown if it is less;
> the interest, any default charges and annual card fee, plus 1% of the remaining balance, or
> the amount we tell you under section 9.2 of your credit agreement.

9.2. The Minimum Payment must reach your account by the payment date shown
on your statement. If you receive a refund to your account after your statement
date, you must still pay the remaining balance or the Minimum Payment

If i understand this correctly and we assume a balance of £2000 then the min payment would be £25 as 1% of balance would be £20 which is lower than the £25 minimum.
So if I transfer all my debt to this card the balance would be £3,457 with a min payment of £34.57. Which is a lot less than i am paying out at the moment.

Do you think this is the best option for me considering i should be able to pay off the whole balance within the next 15 months or would a bank loan be more sensible?


Any advice would be appreciated.

Nebulous2

How did you get a £2000 balance on the card if you’ve never had a credit card before? If that was purchases then you might land with interest sooner than you think.

Assuming it wasn’t and the 0% applies for 20 months, then your plan is sound, make a money transfer to your current account and pay off the higher interest debt with it.

Remember not to use the card for purchases, pay at least the minimum on time every month and have a plan to pay off the debt.

MallyGirl

Just paying the minimum will not pay off the debt before the end of the 0% deal so that is something to bear in mind - what is the standard rate for that card after the 0%? It is likely to be more than 14.9% and probably more than 19.9%.
If you do move the debt to this card it would help smooth the impact of your variable wage but you need to consider your will power.
Will you use this as an opportunity to benefit from the 0%, cut back a bit and throw every spare penny at the card debt, or will you let yourself cruise along making minimum payments and still owe a fair bit when the 0% runs out?
Your card has 0% on balance transfers and money transfers. You cannot balance transfer from finance agreements (usually) so you would be doing a money transfer to your bank account and then paying off the finance. There will be a one off fee for this - maybe 3% of the amount transferred.
A bank loan APR is likely to be more than the money transfer fee and it would be applied each year not as a one off. With a loan you might also be tempted to borrow just that little bit more, or borrow over a longer period, but if you really can pay it off before the end of the 0% then you should go with the card.
If you have the discipline then the cc will save most. If you don't then the bank loan will force you to keep on track as you can't vary the payments.
Check that the 0% transfer rates are still active as some only apply on transfers in the first 90 days of the card and you have gone beyond that.