Confused about credit card money transfers

Sfullen96

Hi there, I'm looking to pay for some home improvements to the tune of around £2,700. My credit card has money transfer options which will allow me to transfer the full amount form my credit card to another account with just 3.9% interest over 36 months, however I'm a little confused as to what this means in terms of paying back.

As I understand the £2,700 will be added as balance to my credit card and will need to be paid back as it would for any regular purchase with the credit card; the account itself has around a 20% APR interest rate, so does this mean that I'd be paying the 20% + the 3.9% interest rate or just the 3.9%, or have I got that totally wrong? If it's the former then it would just be better to pay for everything on the credit card itself and pay just the 20% interest, correct?

This is my first time using a credit card to pay for a big purchase so any help would be greatly appreciated.

Thanks

molerat

If it states 3.9% APR then that is what the offer is.  Does it also state a fee %, usually quoted separately ?

Sfullen96

molerat said:

If it states 3.9% APR then that is what the offer is.  Does it also state a fee %, usually quoted separately ?

Thanks for the reply. 

Having read through everything it seems it only mentions the 3.9%, but I've already got a small balance on the account which is further adding to my confusion, as that would be under the 20% Apr, I think!

It seems strange they'd let me transfer money from the account and pay it back for far less than the main interest rate on the account, I feel like I'm missing something haha! 

molerat

Cards will offer balance and money transfers at below the usual rate. You need to look carefully at what is on offer as there will be a fee quoted even if 0%

On one of my cards I am currently being offered 0% over 20 months with a 4% fee or 3.9% over 36 months with a 0% fee.

The current balance will be at the usual APR.  One thing to note is that (generally as there are some exceptions) any purchases made after the MT is taken will incur interest from the time of purchase as you will not be paying off the full balance each month.

[Deleted User]

MT simply means they put cash into your account from your card and you pay a fixed rate of interest until it is cleared. Make sure you read the Ts & Cs 100% as it's not uncommon for cards to have odd rules in terms of how they allocate payments - it should go to the balance that has the highest interest but not always. Make sure you do not use this card for spending either as there are many examples of where this has gone wrong for people

Sfullen96

Deleted_User said:

MT simply means they put cash into your account from your card and you pay a fixed rate of interest until it is cleared. Make sure you read the Ts & Cs 100% as it's not uncommon for cards to have odd rules in terms of how they allocate payments - it should go to the balance that has the highest interest but not always. Make sure you do not use this card for spending either as there are many examples of where this has gone wrong for people

Ah okay, so I've already spent ~£300 on this card, so if I were to transfer the £2,700 I need, you think this could cause complications?

Do you reckon applying for a new credit card specifically for a money transfer would be a better idea?

Sfullen96

molerat said:

Cards will offer balance and money transfers at below the usual rate. You need to look carefully at what is on offer as there will be a fee quoted even if 0%

On one of my cards I am currently being offered 0% over 20 months with a 4% fee or 3.9% over 36 months with a 0% fee.

Ah, sorry I misread your comment before. It does say 0% fee, yes.

The offer I'm seeing is exactly the same, 3.9%/36 months/0% fee, but I already have ~£300 balance on the account which might complicate things?

molerat

Is the outstanding balance from previous statements or is it new spending and are you going to pay it off at the next due date ?  No real complications, any payments you make will be set against the higher APR balance first which will include any further purchases so bear in mind that if you continue to use the card you might not be paying down the transfer which may leave you in  a bit of a pickle in 36 months time.

ItsComingRome

Sfullen96 said:

molerat said:

Cards will offer balance and money transfers at below the usual rate. You need to look carefully at what is on offer as there will be a fee quoted even if 0%

On one of my cards I am currently being offered 0% over 20 months with a 4% fee or 3.9% over 36 months with a 0% fee.

Ah, sorry I misread your comment before. It does say 0% fee, yes.

The offer I'm seeing is exactly the same, 3.9%/36 months/0% fee, but I already have ~£300 balance on the account which might complicate things?

Not really, no.

It can cause problems with 0% deals and spending on them but in this instance it'll be fine.

Sfullen96

molerat said:

Is the outstanding balance from previous statements or is it new spending and are you going to pay it off at the next due date ?  No real complications, any payments you make will be set against the higher APR balance first which will include any further purchases so bear in mind that if you continue to use the card you might not be paying down the transfer which may leave you in  a bit of a pickle in 36 months time.

It's something I'm in a position to pay off in full before doing the money transfer.

I see. So if I were to pay off the current balance, then do the money transfer I'd be fine to pay back monthly at the lower rate? But if I were then to use the card to purchase other things I'd need to pay that back at the higher interest before paying down the MT?

[Deleted User]

Basically your first payment, say it's £300, goes to the £300 on your card and clears the debt

The next £300 clears any trailing interest and the remainder is then allocated to your MT debt

The danger with BT or MT cards is when you spend on them after doing the balance as it's not guaranteed that your payment will be allocated to the new payment which could accumulate interest at the same time.

It's always safer to have 2 or more cards, 1 for spending, 1 for transfers so you never risk this