0% interest rate - Minimum Payment

OntheFence_

Hello! I'm very new to the world of credit cards and am exploring a 0% interest rate card for large payment soon.

I am getting my head around the minimum payment rules and have been confused by some. There is a barclaycard one that I am eligible for which states:

"always pay at least the monthly minimum repayment (1% of balance plus interest or £5, whichever is higher) or you could lose the 0% deal."

So in regards to this, if it is a 0% interest rate card for 24 months, is the 'plus interest' element considered 0? So in essence my minimum payment is 1% of the balance or £5 (whichever is higher)? Or is there a slightly different interest rate attributed to the minimum payment?

Sorry if this is daft question! Very new to the cards and trying not to get caught out for what will be just a single purchase!

CliveOfIndia

OntheFence_ said:

So in regards to this, if it is a 0% interest rate card for 24 months, is the 'plus interest' element considered 0? So in essence my minimum payment is 1% of the balance or £5 (whichever is higher)? 

Correct.

Ideally set up a Direct Debit for the minimum payment so you never forget.  As the T&Cs state, it's standard practice to have the promotional rate immediately cancelled if you miss a payment.

Bear in mind that you also need to be putting money aside each month to repay the full balance when the promotional rate expires.  You may be able to transfer any remaining balance to another card, but it's a very unwise gamble to just assume you'll be able to do so.

Oh, and if you are accepted for the card, make sure you double-check your particular T&Cs.  24 months at 0% might be their advertised offer, but some applicants may not be given this, depending on your own circumstances and credit history.  It may be that you're offered 0% for 12 or 18 months or something.

OntheFence_

CliveOfIndia said:

OntheFence_ said:

So in regards to this, if it is a 0% interest rate card for 24 months, is the 'plus interest' element considered 0? So in essence my minimum payment is 1% of the balance or £5 (whichever is higher)? 

Correct.

Ideally set up a Direct Debit for the minimum payment so you never forget.  As the T&Cs state, it's standard practice to have the promotional rate immediately cancelled if you miss a payment.

Bear in mind that you also need to be putting money aside each month to repay the full balance when the promotional rate expires.  You may be able to transfer any remaining balance to another card, but it's a very unwise gamble to just assume you'll be able to do so.

Oh, and if you are accepted for the card, make sure you double-check your particular T&Cs.  24 months at 0% might be their advertised offer, but some applicants may not be given this, depending on your own circumstances and credit history.  It may be that you're offered 0% for 12 or 18 months or something.

Brilliant thanks! I'm hoping to be in a position to have paid off the full amount by the end of the 24 months. But will definitely look into balance transfer options should anything cause me to not do that!

Brie

Agree with what Clive has said.

Definitely set up a DD.  I have occasionally gone for a set amount rather than the minimum.  Obviously it mean losing a bit on the 0% interest (i.e. I lose the interest I might have got in my savings account if the money was in there). 

One reason for doing this is to ensure that the balance is paid off by the due date.  So while the minimum would initially be £12 for you if you had a £1200 balance if you instead pay £50 a month the balance will be cleared by the end of the 24 months.

Another thing I've sometimes done is set an amount on a nice round number above the minimum.  So again if the minimum was £12 you might set your monthly DD to £15 and then when the minimum gets under £10 revise it to be £10.  These things just make my reviewing of my various accounts easier.

Hope that makes sense. 

PixelPound

Make payments of at least £1 above minimum. The reason is some  companies report minimum payment to credit ref which can be seen as a negative in future applications. 

surreysaver

PixelPound said:

Make payments of at least £1 above minimum. The reason is some  companies report minimum payment to credit ref which can be seen as a negative in future applications. 

No need for this, as the credit card company reports it as a promotional balance anyway.
I've never paid more than the minimum and it's never been an issue.

PixelPound

surreysaver said:

PixelPound said:

Make payments of at least £1 above minimum. The reason is some  companies report minimum payment to credit ref which can be seen as a negative in future applications. 

No need for this, as the credit card company reports it as a promotional balance anyway.
I've never paid more than the minimum and it's never been an issue.

yes, of course.

Still, set DD for the minimum amount. Your statement each month will tell you how much is going to be taken. Ensure enough money is in so it never bounces.

It then depends what you want to do by the end of the interest free. If it is to have paid most of it off, then you need additional payments (or up your DD). If it's to pay off at the end from a lump sum or trying to transfer elsewhere, then just keeping the minimum is fine. Just be aware that you need a plan for when the interest free ends otherwise you will start accruing full rate interest (which is why CC co's make these offers)