Low Interest better than No Interest?

danhenshy23

I'm looking for a balance transfer credit card as I am needing to shift some debt from an existing credit card which is nearing the end of its Interest free period.

My bank is offering me  0.9% Interest rate for 36 months with no fee so my question is whether this is better than a 0% Interest card with a fee of say 2% (I think 2%-3% is pretty standard is it not).

Is there a way I can calculate the projected interest to see which would be cheaper?

Thanks

Worried_fool

The amount you would pay at a rate of 0.9 per cent on a hundred pounds would be less than three pounds for three years. If you are making payments and can even make ocasional over-payments then the total interest bill will be less than this. OTOH if you pay a fee that will be charged on the full amount, and payments made later (even the next day) will not reduce the fee.

[Deleted User]

Yes. You just need to know the period over which you would pay off the debt and an estimate of the monthly balance.

[Deleted User]

Ensure you would actually get the 0% offer (no harm in applying as you have the backup) and that the 0.9% offer is guaranteed

The interest paid on such a low amount would indeed be minimal - vs a fixed payment sum e.g. 3% on a £1000 transfer is £30

You can use a calculator like this to do the sums. £2000 on a 1% card (they won't accept 0.9) paying £100 a month - £16 interest

https://www.moneyhelper.org.uk/en/everyday-money/credit-and-purchases/use-our-credit-card-calculator

danhenshy23

Thanks. Have found a similar calculator which suggests if I moved £7,000 and paid £250 a month, my total interest paid over the 28 months at 0.9% would be £77.

A 0% Interest card with a 2.5% fee would cost £175 in interest, so there seems to be a saving by going with low interest vs no interest.

https://www.moneysupermarket.com/credit-cards/calculator/

[Deleted User]

danhenshy23 said:

A 0% Interest card with a 2.5% fee would cost £175 in interest, so there seems to be a saving by going with low interest vs no interest.

Just to clarify, the fee isn't interest - it's a one off fee.

danhenshy23

Aye, my poor wording

bris

If you are confident in clearing the balance then 0% is obviously better, but not many offer 0% for more than a year. What 0% period have you been offered and what's the interest rate after this time? 

If you think about it and believe there is a chance you might not clear the balance then the 0.9% is a no brainer, it's so cheap that it's what you should do if there is any doubt.

[Deleted User]

bris said:

If you are confident in clearing the balance then 0% is obviously better, but not many offer 0% for more than a year. What 0% period have you been offered and what's the interest rate after this time? 

If you think about it and believe there is a chance you might not clear the balance then the 0.9% is a no brainer, it's so cheap that it's what you should do if there is any doubt.

I don't know about "not many" as all the MSE recommended top cards offer more e.g. Santander 31, Sainsburys 30, Virgin 27 etc. My Barclaycard offers are always 2 years

femalemonarchfemalecanine

bris said:

If you are confident in clearing the balance then 0% is obviously better, but not many offer 0% for more than a year. What 0% period have you been offered and what's the interest rate after this time? 

If you think about it and believe there is a chance you might not clear the balance then the 0.9% is a no brainer, it's so cheap that it's what you should do if there is any doubt.

it depends on the fee. A low interest rate can often work out better than a fee