Monthly credit card repayments and money transfer

keldar89

Hi, I currently have £200 on a credit card which I am paying off about £100 each month. This is at an interest rate of 19.2% APR, I estimate it being paid off by early May. I would also like to sort out my overdraft which I am overdrawn with by a bit of a bigger amount (£1.5k to put it into context). My credit card has an offer of 0% interest on money transfers for a year; which I am considering taking up to sort out my overdraft - I can pay this off within 3-4 months, all being well. Nationwide, the building society I am with, recently increased their overdraft rates to a whooping 39% APR - which is crazy. So the 0% monthly transfer feels like the way to go for me (there is an initial transfer charge, but that is a one-off as opposed to monthly interest).

My plan, therefore, is to money transfer from my Barclaycard credit card to my Nationwide account to get me out of my overdraft, that way I won't have to pay interest every month. But this is where my question comes in. I do not understand how the interest will be calculated over the next few months? If I money transfer £1.5k to Nationwide, that will accumulate no interest, but it will be applied to the outstanding £200 balance until I pay that off in full. Are items on a credit card paid off in order? I.e. if I pay off £500 in the first month, then that's the £200 balance paid off from the initial amount. Does that mean I'll accumulate 0% interest with next month's statement? If that isn't the case, I am considering paying off the £200 credit card balance first (which will incur a bigger overdraft), money transferring it back to my Nationwide account and paying off £1.7k, all interest free. But I am uncertain, and it depends on how interest is calculated each month.

I hope that makes sense - I am happy to elaborate if not. Thank you .

Steveal

@keldar89 Assuming I have understood your question correctly -

Scenario 1 - you end up with two balances on the Barclaycard, one for £200 at 19.2% and one for £1,500 at 0%. As per Barclaycard T&Cs, they will apply any payment made to reduce higher interest rates balances first, before paying down lower interest rate balances. So any payments made should automatically reduce the £200 balance+interest first.

Scenario 2 - you pay off the £200 balance with your Nationwide overdraft and then use the money-transfer offer on your Barclaycard to pay off the overdraft, thus ending up with a ~£1,700 balance on your Barclaycard at 0% (albeit with a one-off fee).

In your place, if sufficient credit is available, I would do a money transfer of £1700 from the barclaycard to Nationwide, thus paying off the OD of 1,500 and then use the remaining £200 to pay off the balance on the CC as well. Less hassle.

keldar89

Thanks for the prompt and helpful response @Steveal got you! To be fair, I didn't realise the credit card is split into two balances (I don't regularly use them, least of all for transfers). I agree - I think the £1700 move is best. I will do that now .