Pitfalls using 0% Credit as a loan when you have the funds

Reelingsilk

We are about to embark on a DIY project and have £70k in cash funds.  I'm currently getting almost 5% return on that cash.  So I though for a few of the major purchases like the kitchen (12k) and Tiles (3k) where I am purchasing those items from a business that I could use a 0% 12-20 month credit card and then use the funds in place to pay off the dept within the allotted 0% time. Thus still benefiting from the interest whilst paying no interest as well as ever increasing the credit score, I'm just worried there are pitfalls I've not thought of?  Any advise welcome please? 

Brie

Precisely what I insisted on with our kitchen refit through a major DIY retailer*.  They offer a 0% loan scheme where you apply for credit and you can use that for any purchases through them for 3 years.  So major portion of the kitchen, cupboards, appliances have all been put on that and then extras can be added whenever we need anything else from them.  DD payments are organised to be sufficient to pay the loan in full over the 3 years.  I was unsure due to my very moderate income currently whether my application would be successful but they granted me credit of £25k which is twice what we have bought from them.  

There is extra that needs to be paid directly to the installers but that is a fraction of the cost.  We could have had this charged through the retailer and thus go on the 0% but that would bump up the cost so I decided to pay directly.  

Meanwhile I'm keeping my cash in a savings account with an APR of about 6%.  

*starts with B.  fyi - don't buy tiles from them.

DullGreyGuy

Reelingsilk said:

We are about to embark on a DIY project and have £70k in cash funds.  I'm currently getting almost 5% return on that cash.  So I though for a few of the major purchases like the kitchen (12k) and Tiles (3k) where I am purchasing those items from a business that I could use a 0% 12-20 month credit card and then use the funds in place to pay off the dept within the allotted 0% time. Thus still benefiting from the interest whilst paying no interest as well as ever increasing the credit score, I'm just worried there are pitfalls I've not thought of?  Any advise welcome please? 

Firstly, does your chosen company accept such large amounts on a credit card? The kitchen company we discussed only took up to £1k by CC and anything above that had to be debit card or BACS. Are you happy to limit yourselves only to companies that are happy to take the full amount by CC?

The second issue is something goes wrong and either you need the cash funds for something else or such and end up with the debt continuing post the interest free period. A friend just didn't do their sums right and ended up paying for a large unexpected bill out their stoozling monies and the interest paid on the credit cards quickly outweighed the interest earned. If they didn't have the cash there then they may have gone a different route with the big bill 

born_again

Reelingsilk said:

We are about to embark on a DIY project and have £70k in cash funds.  I'm currently getting almost 5% return on that cash.  So I though for a few of the major purchases like the kitchen (12k) and Tiles (3k) where I am purchasing those items from a business that I could use a 0% 12-20 month credit card and then use the funds in place to pay off the dept within the allotted 0% time. Thus still benefiting from the interest whilst paying no interest as well as ever increasing the credit score, I'm just worried there are pitfalls I've not thought of?  Any advise welcome please? 

1st thing to think about is will you get a limit suitable for your needs.
Savings do not count, they only look at income & available debt.

Reelingsilk

born_again said:

Reelingsilk said:

We are about to embark on a DIY project and have £70k in cash funds.  I'm currently getting almost 5% return on that cash.  So I though for a few of the major purchases like the kitchen (12k) and Tiles (3k) where I am purchasing those items from a business that I could use a 0% 12-20 month credit card and then use the funds in place to pay off the dept within the allotted 0% time. Thus still benefiting from the interest whilst paying no interest as well as ever increasing the credit score, I'm just worried there are pitfalls I've not thought of?  Any advise welcome please? 

1st thing to think about is will you get a limit suitable for your needs.
Savings do not count, they only look at income & available debt.

Well I'm in the process of applying so we shall see, I'll post and let you know.  I ended up applying with a CC company I already have a card with that has a 15k limit but no balance it has always been paid in full and is our "Emergency" card.  Truth be told its only £4-500 in interest so maybe not worth all the hassle, Id just rather have it in my pcoket than not.  

Reelingsilk

DullGreyGuy said:

Reelingsilk said:

We are about to embark on a DIY project and have £70k in cash funds.  I'm currently getting almost 5% return on that cash.  So I though for a few of the major purchases like the kitchen (12k) and Tiles (3k) where I am purchasing those items from a business that I could use a 0% 12-20 month credit card and then use the funds in place to pay off the dept within the allotted 0% time. Thus still benefiting from the interest whilst paying no interest as well as ever increasing the credit score, I'm just worried there are pitfalls I've not thought of?  Any advise welcome please? 

Firstly, does your chosen company accept such large amounts on a credit card? The kitchen company we discussed only took up to £1k by CC and anything above that had to be debit card or BACS. Are you happy to limit yourselves only to companies that are happy to take the full amount by CC?

The second issue is something goes wrong and either you need the cash funds for something else or such and end up with the debt continuing post the interest free period. A friend just didn't do their sums right and ended up paying for a large unexpected bill out their stoozling monies and the interest paid on the credit cards quickly outweighed the interest earned. If they didn't have the cash there then they may have gone a different route with the big bill 

Had not even considered that they wouldn't take the payment in full on a card DullGreyGuy so thanks for the heads up, small local company but a great price and package so will see.  I appreciate the cautionary tale regarding ability to pay we go in eyes wide open on what we can afford, so i may end up sleeping on bricks

km1500

the other advantage by paying on credit is of course you get S75 protection which you would not get if you paid cash, although of course the total for each contract has to be under 30K and over 100 pounds