Money transfer offer: what max amount should I use?

friolento

I have a 20 month 0% interest money transfer offer for up to £5,400. My card limit is £6,000. Should I go for the full £5,400 or for less? I am not worried about the impact on my credit reference files as they are in good shape, and I won't need to apply for any loan / mortgage etc.

The fee is 3%, and I can get a 6%18 month fix. I am a HR tax payer, have used my current year's ISA allowance, and will use next year's ISA allowance from other funds.I will also bust my PSA for the forseeable future. So I will need to pay 40% tax on the interest. Even after 40% tax on the interest, I reckon I would still make £141 if I borrowed £5,400. I ignore the small risk that the Chancellor might fiddle with the savings interest tax.

How much would you suggest I should borrow?

MorningcoffeeIV

Given the small returns, I wouldn't bother.

But obviously if you need the funds, then go for the maximum.

On-the-coast

I basically agree with your calculation of profit arising from deal. 

I wouldn’t do this (for such a small reward) Too many chances of deal being screwed up by a missed minimum payment or tax legislation change. 

born_again

have you factored in the monthly repayments?

friolento

born_again said:

have you factored in the monthly repayments?

No, but I realise they would reduce the profit.

On balance, I agree it's too small a deal to go after.

Altior

One consideration is expediting a pension contribution. Either directly or via SalSac proxy. Obviously unlikely to be able to access it to pay off the card at the end of the fixed rate, but there are a few potential advantages. Even if it was just whacking it into a MM fund for the short term, within a pension wrapper. 

JuliusCaesar

friolento said:

I have a 20 month 0% interest money transfer offer for up to £5,400. My card limit is £6,000. Should I go for the full £5,400 or for less? I am not worried about the impact on my credit reference files as they are in good shape, and I won't need to apply for any loan / mortgage etc.

The fee is 3%, and I can get a 6%18 month fix. I am a HR tax payer, have used my current year's ISA allowance, and will use next year's ISA allowance from other funds.I will also bust my PSA for the forseeable future. So I will need to pay 40% tax on the interest. Even after 40% tax on the interest, I reckon I would still make £141 if I borrowed £5,400. I ignore the small risk that the Chancellor might fiddle with the savings interest tax.

How much would you suggest I should borrow?

Borrow the whole amount and put the money in a fixed-rate ISA. These were not competitive until recently, but make sense in your situation (or any basic-rate taxpayer likely to exceed the £1000 limit). Several fixed-rate ISAs are currently paying around 5.8%.

adindas

To me take the maximum you could get as long as you could benefit all the money you get. In your case it is clearly you benefit from this. It is the same amount of time you need to spend.

friolento

JuliusCaesar said:

friolento said:

I have a 20 month 0% interest money transfer offer for up to £5,400. My card limit is £6,000. Should I go for the full £5,400 or for less? I am not worried about the impact on my credit reference files as they are in good shape, and I won't need to apply for any loan / mortgage etc.

The fee is 3%, and I can get a 6%18 month fix. I am a HR tax payer, have used my current year's ISA allowance, and will use next year's ISA allowance from other funds.I will also bust my PSA for the forseeable future. So I will need to pay 40% tax on the interest. Even after 40% tax on the interest, I reckon I would still make £141 if I borrowed £5,400. I ignore the small risk that the Chancellor might fiddle with the savings interest tax.

How much would you suggest I should borrow?

Borrow the whole amount and put the money in a fixed-rate ISA. These were not competitive until recently, but make sense in your situation (or any basic-rate taxpayer likely to exceed the £1000 limit). Several fixed-rate ISAs are currently paying around 5.8%.

As I said, I have used my ISA allowance already

Altior said:

One consideration is expediting a pension contribution. Either directly or via SalSac proxy. Obviously unlikely to be able to access it to pay off the card at the end of the fixed rate, but there are a few potential advantages. Even if it was just whacking it into a MM fund for the short term, within a pension wrapper. 

I don't work. I can only contribute £2,880 a year to a pension and I did that on April 6.