Any catch?

horsewithnoname

i have a money transfer offer on one of my cards, 3.5% fee, then 0% till Jan 2026. I have an account that pays 5.1% interest. Surely it’s worth transferring and putting in my account because as far as I can see, the only risk is that the account interest might drop. Otherwise surely I’d be up on the deal?

jaypers

No catch as long as you pay at least the minimum payment each month, don’t use the card and pay it off in full by Jan 2026. Used to be a big thing in the 90’s known as carpetbagging. No fees then either. I did quite a bit on an Egg Card. 

eskbanker

jaypers said:

No catch as long as you pay at least the minimum payment each month, don’t use the card and pay it off in full by Jan 2026. Used to be a big thing in the 90’s known as carpetbagging. No fees then either. I did quite a bit on an Egg Card. 

More typically referred to as 'stoozing' - carpetbagging generally referred to opening accounts with building societies in the expectation of windfall shares if demutualising.

Discussed in more detail on a dedicated board:

Stoozing: free cash from credit cards — MoneySavingExpert Forum

MattMattMattUK

horsewithnoname said:

i have a money transfer offer on one of my cards, 3.5% fee, then 0% till Jan 2026. I have an account that pays 5.1% interest. Surely it’s worth transferring and putting in my account because as far as I can see, the only risk is that the account interest might drop. Otherwise surely I’d be up on the deal?

It depends how much of your savings allowance you are using, if you end up paying basic rate tax on it then the profit is reduced and if you end up paying higher rate tax you would lose money. 

https://www.gov.uk/apply-tax-free-interest-on-savings

A quick example, based on 12 months rather than 18 for ease and using £20k as the figure you borrow, if you were not currently using your savings allowance, or you were below the tax threshold, then you be £320 in profit after one year. However if you were a higher rate taxpayer you would only be £112 in profit (lower savings allowance). If you had already used your savings allowance elsewhere (non-ISA savings) and were a basic rate taxpayer then you would make £204 profit, if you were a higher rate taxpayer then you would lose £88 and if you were an additional rate payer then would lose even more. 

So the key things to account for first, are how much do you earn and how much of your savings allowance are you already using. Then you have to decided whether the rate of return is worth the hassle. 

horsewithnoname

good point MattMattMattUK, yeah, I will use my allowance this year, so that does make it less appealing 😁
The only year I’m ever likely to exceed the allowance, ironically 😂

easyasonetwothree

Unless it's a substantial amount that you can transfer, you've got to ask if it's worth the effort (and possible hit to your credit record if you're looking for any credit in the next little while).

horsewithnoname

Nearly ten thousand, but even if rates stay the same it’s just over £100 so I’ll probably leave it. 

zagfles

MattMattMattUK said:

horsewithnoname said:

i have a money transfer offer on one of my cards, 3.5% fee, then 0% till Jan 2026. I have an account that pays 5.1% interest. Surely it’s worth transferring and putting in my account because as far as I can see, the only risk is that the account interest might drop. Otherwise surely I’d be up on the deal?

It depends how much of your savings allowance you are using, if you end up paying basic rate tax on it then the profit is reduced and if you end up paying higher rate tax you would lose money. 

https://www.gov.uk/apply-tax-free-interest-on-savings

A quick example, based on 12 months rather than 18 for ease and using £20k as the figure you borrow, if you were not currently using your savings allowance, or you were below the tax threshold, then you be £320 in profit after one year. However if you were a higher rate taxpayer you would only be £112 in profit (lower savings allowance). If you had already used your savings allowance elsewhere (non-ISA savings) and were a basic rate taxpayer then you would make £204 profit, if you were a higher rate taxpayer then you would lose £88 and if you were an additional rate payer then would lose even more. 

So the key things to account for first, are how much do you earn and how much of your savings allowance are you already using. Then you have to decided whether the rate of return is worth the hassle. 

You've not accounted for the minimum payment, unless you have a card where spending up to the min payment each month still gives you the interest free exemption, and even if it does you have to be careful, particularly with refunds. 

friolento

horsewithnoname said:

i have a money transfer offer on one of my cards, 3.5% fee, then 0% till Jan 2026. I have an account that pays 5.1% interest. Surely it’s worth transferring and putting in my account because as far as I can see, the only risk is that the account interest might drop. Otherwise surely I’d be up on the deal?

is your 5.1% a fixed rate or a variable rate? Interest rates are very likely to come down over the next year