Stoozing with a Money Transfer card - figures sanity check

bailey_win

Have stoozed before but a long time ago.

With interest rates on the rise, it looks like stoozing with a money transfer card might be profitable?

Specifically looking at the MBNA 14-month 0% card - soft search suggests I'd get a £14k limit, so a £490 fee (3.49%).

Rough figures over 12 months.

Minimum monthly payment over that term would be £3,800 (2.5% a month).

That leaves £10,200 untouched - so put that in a fixed saver (6.1%) and you'd earn £650.

With the £4,300 in an easy access saver (4.3%), you'd earn £80.

That suggests a profit of £250?

I'm aware doing it with a 0% card would avoid the fee, but the cashback I'd lose would offset this and you'd need to build the balance over time. Plus this is easier to reconcile mentally - you borrow a big chunk of money but it only ever goes to one of two savings accounts. Same reason for not overpaying mortgage with it.

Just want some sanity check on my figures, please?

noh

Seems to be about right.
There is a useful calculator here https://stoozing.com/stoozcalc.php

WYSPECIAL

Safe you sure about the minimum repayments? They look high for MBNA. If they are lower it will increase your profit further.

brucefan_2

I'd be very grateful if someone could provide a link to a calculator/formula  to determine the final interest on a declining one year balance.

e.g. £2400 starting balance, interest rate 5.2%, monthly repayments of £200 to a 0% repayment, bringing end of year balance to zero.

I've done all sorts of searches and tied myself in knots trying to make sense of this and I think I'm missing something blindingly obvious.

All help much appreciated

grumbler

brucefan_2 said:

I'd be very grateful if someone could provide a link to a calculator/formula  to determine the final interest on a declining one year balance.

e.g. £2400 starting balance, interest rate 5.2%, monthly repayments of £200 to a 0% repayment, bringing end of year balance to zero.

I don't understand what you want. If the final balance is zero, so is the final interest (or cloze to zero). And what's "0% repayment" if the interest rate is 5.2%?
Is it just me? Do you mean the total interest? If so, see https://www.moneysavingexpert.com/loans/personal-loan-calculator/ - How much would a loan cost me?

brucefan_2

@grumbler

Thanks for replying. Reading my question back, I didn't explain it as clearly as I could have done.

I have taken out a 0% money transfer card. There is a 'lump sum' in a 1 year fix earning 6.1% and not relevant for this calculation.

The amount needed to service the monthly repayments totals, for this example's sake  is £2400 

This £2400 will reduce by £200 each month as I service the repayments.

I currently have that in an account paying 5.2%.

In month two I will only have £2200, month three £2000 and so on until the repayments have been completed in month 12.

My question is, 'how do I calculate the interest on the initial £2400 (at 5.2%) as it reduces by £200 each month down to zero'?

MorningcoffeeIV

For a rough answer, use the monthly rate and calculate the monthly interest on the declining balance each month.

grumbler

brucefan_2 said:

@grumbler


I have taken out a 0% money transfer card. There is a 'lump sum' in a 1 year fix earning 6.1% and not relevant for this calculation.

The amount needed to service the monthly repayments totals, for this example's sake  is £2400 

This £2400 will reduce by £200 each month as I service the repayments.

I currently have that in an account paying 5.2%.

In month two I will only have £2200, month three £2000 and so on until the repayments have been completed in month 12.

My question is, 'how do I calculate the interest on the initial £2400 (at 5.2%) as it reduces by £200 each month down to zero'?

If 5.2% is 'gross', then monthly rate is 5.2/12=0.4333%. (If it's AER, then 1.052^(1/12)-1).

(2400+2200+...+200)*0.4333% =  200*(12+11+10+...+1)*0.4333% = 200*(12+1)/2*12*0.4333% = 200*6.5*0.4333%

https://en.wikipedia.org/wiki/Arithmetic_progression

swindiff

If you want to maximise your interest, just pay off the minimum amount each month rather than £200, then clear it at the end of the 0% period.