Cash transfer to use 0% offer?

Dontpointatme

Hi. 

I have approx £7k on a credit card with a £14k limit. I used to have 2 cards that I would swap between to use the 0% deals but one cut my limit down to £250 a while ago, so I can’t do that any more. My current 0% offer finishes in December and then I will go on to standard rate which will cost a fortune in interest. Does anyone know if there’s a reason I can’t take advantage of a 0% cash advance for £7k, then pay that back off the credit card and essentially use that as a balance transfer to get the card back to 0%? Does that make sense or not? Thanks…

sourcrates

Without knowing more about your financial circumstances, its hard to advise really.

Moving debt around to take advantage of zero % deals, is always only a short term strategy.

Does your current lender offer the cash advance free of interest ?

Because it usually just applies to goods, not cash.

TheAble

I suppose you could do that, though you should check first about how payments are allocated.

Might it not be a better idea though to try and get yourself out of this perpetual cycle..?

Dontpointatme

It’s come down from £14k three years ago, so I am trying to get rid of it. I’m paying £300 per month, minimum is £85… it’s the only debt I have left. 

Yes, my lender offers balance transfer at 2.99% or money transfer at 3.99%. The monthly interest rate as standard is 1.527%. It says on my statement that payments go to the debt with highest interest first, so in my head when I pay the money back it should clear the current balance and start again at 0% for another year (which is what they are offering)

GN_TDCI

Firstly, you would need to check your maximum amount available for a cash payout. As you have 50% of the card already used, you're unlikely to get all the cash you need. Card usually only allow up to 95% of their capacity from my experience, so that means you have at best £6300 available. However, you need to factor in the fee of 3.99% too.

That means you're looking at around £6000 available (give or take).

So, you would still owe £1000 at 18.4%, and then 6300 at 0.0%.

Alternatively, with the balance as you have it now and the repayments you are making now, you will have the £7000 balance paid off in full in 2 years and 5 months, and accrue £1555 in interest (approx.).

If we compared that to a loan, a Natwest Loan of £7000 over 2 years and 5 months would cost you £265.08 a month. Whilst it would halve your interest in the long term (£690 instead of £1555), there is no time benefit and very little monthly difference.

You could pay off the loan in 2 years and 1 month - but saving 4 months isn't the be-all and end-all.

Personally, as the APR isn't that high, I would probably just let it run without going through the rigmorale of trying to move cash out. At least this way, if circumstances did change, you could drop to minimum payments for a month or two if needed without impacting the hard work put into the credit score.

EssexHebridean

Have you done a recent SOA to see if you can free up any more money to throw at the debt? while it sounds like you're making good progress, the fact that your card limit was slashed to £250 sounds as though your credit history is giving lenders cause for concern, and you probably want to address that.