Tip: use 0% purchase offers instead of balance transfers to avoid the fees

beninmangotown

I'm using balance transfers to pay off my mortgage early, but I've noticed the no fee balance transfer is very rare now, plus the credit limits they offer are usually low.

I've started using the 0% purchase offers instead, and thought this might be interesting to others.

This relies on having a budget you spend on cards each month for groceries etc. and the money to pay it off each month. You also have to be strict with your budget, as it's easier to spend more than you save.

What you do is run two cards alongside each other. Put all your monthly spending on the new 0% purchase card, and then use the money you would have paid (plus any extra!) to pay down the other card. Before the 0% term ends, get a new card and flip it round.

I also keep spending under 50% of the limit and overpay the minimum slightly, as that apparently/allegedly helps your credit score.

Not only are there no fees on 0% purchase cards, but you normally get higher credit limits, and they'll often increase this limit again while you're still within the 0% term.

Hope that helps someone. Or let me know any thoughts!

And if anyone knows a way to find no fee balance transfers, I'm all ears!

BikingBud

Maybe I am being thick but you are not achieving the benefit of deferring the debt.

On card one, the old card, you need to pay of the lump when the interest free period ends. If you do not pay off the lump then you transition to the new rate and start accruing fees. Even if you pay them off over a period interest will start from the end of the offer period.

On card two you can build a lump by paying the minimum vice pay it off every month and the difference goes into savings so that when you get to the end of the interest free term you can pay off the lump with your savings and pocket the interest

If you are paying off card one before you get to the end of the offer period then where is the benefit?

kimwp

https://forums.moneysavingexpert.com/discussion/comment/81898527#Comment_81898527

I've not worked through the details, but it does seem to be playing a potentially dangerous (or expensive anyway) game for not much gain.

Saving the mortgage interest rate at the risk of having to pay a high credit card rate.

It's a fairly common approach for stoozing, but in that case the cash is available to pay off the cards if no more transfers are available.

beninmangotown

No, this is a way to reduce the debt rather than defer it indefinitely. You pay off each card within the offer period, but may need more than one card to maintain the debt depending how long it takes to pay off.

Altior

Unless you have a terrible mortgage rate, cash savings beats it at the moment.

What you've outlined is a version of slow stoozing, but overpayments into a mortgage are sunk. So the implied risk above refers to a scenario where 0% offers dry up, and the card liability still needs to be settled. Which is fine if you have alternative liquid options or income to cover it.

BikingBud

https://forums.moneysavingexpert.com/discussion/comment/81898638#Comment_81898638

But if you are paying the card off within the period then you should only be paying the minimum to the card and stashing the delta between the total spent and the min payment every month into the best interest account you can get, perhaps multiple regular savers @>6%.

These then give you the lump sum to pay off that card at th end of the offer term.

You might have 2, or more, in parallel and operate the same for both but if you are paying full amount against any one card you are not fully exploiting the interest free period on that card.

I have three, 2 parked close to limit and paying minimum with funds gathering interest and one is currently progressing towards the limit and also only being paid to minimum level. The periods are staggered and if balance transfer at a good rate (low fee) comes up it might be worth transferring that across if I can gain more in interest than the fee.

But it is also getting slightly more complex as higher rate tax on savings interest starts to kick in and diminish the benefits.

surreysaver

I've been doing this for over 20 years with my flexible mortgage. The key to it is having a flexible mortgage, so you can have the money back to pay off the credit card if you cannot find 0% offer that's worth having.

BikingBud

https://forums.moneysavingexpert.com/discussion/comment/81898728#Comment_81898728

Just paying off the mortgage early, no mention of flexible mortgage or using it as a flexible fund:

I'm using balance transfers to pay off my mortgage early,

hence my comments as I cannot quite get my head around the method.

beninmangotown

Sorry didn't explain the mortgage bit as I was focussing on the 0% purchases thing. I currently have an interest-only mortgage with a low rate that expires in September. I want to pay off the mortgage before the rates go up (or at least have the choice) but don't quite have enough to clear the balance. The funds I do have are in savings/ISAs. I'm using the 0% purchase offers to build up card debt that I also have matched in savings, to give me the extra funds to pay off the mortgage at that point. I'm not looking to use the mortgage to make money off savings in the future.

From September I'll still have the credit card balance to clear, which I'm going to do using the 0% purchase cards plan I first mentioned. At this point I won't have a corresponding savings balance, so I'm just gradually clearing the debt while moving it from card to card. The 0% purchases allow me to do this without paying balance transfer fees, and there always seem to be lots of 0% purchase offers.

My point was just that if you're struggling to find decent balance transfers (especially without fees), 0% purchase cards are a way to achieve the same thing. That's assuming you're trying to pay off debt without interest, rather than necessarily looking to make a profit.

surreysaver

https://forums.moneysavingexpert.com/discussion/comment/81898738#Comment_81898738

Yes, I cannot quite understand the mentality of paying a mortgage off early. It's likely to be the cheapest loan you'll ever have, and if you're savvy, the money will be better used elsewhere.

A think a lot of people who pay mortgages off early it's more of a comfort thing.

beninmangotown

That's it exactly.