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Best Balance Transfers Discussion Area

edited 10 June 2010 at 12:31PM in Credit Cards
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  • Victoria11 wrote: »
    I'm new to this site. I am in debt of £15000 on credit cards and just paying their minimum repayments. I want to make balance transfer to whoever will offer me a good deal. I applied to Virgin and NatWest, but was turned down. I never missed any of my repayments. Would anybody suggest what balance tranfer cards have good offers?
    Welcome to MSE!

    Virgin
    and NatWest are not known to score particularly harshly, when compared with other market-leading providers.

    Have you looked at your credit reports to see what's on there? For help, see page 1 of the *How to obtain credit reports* sticky

    For tips to improve your chances of credit card acceptance, have a look at the *Credit Rating: how it works and how to improve it guide* especially Martin's *Manage and Improve your credit score* article ;)

    http://www.moneysavingexpert.com/banking/credit-rating-credit-score#improve

    To help you further, we would need to know which credit cards you hold at the mo or have held recently
    People who don't know their rights, don't actually have those rights.
  • edited 10 September 2009 at 10:41AM
    korukoru Forumite
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    edited 10 September 2009 at 10:41AM
    Martin's latest version of this article says that the MBNA Platinum card with 1.9% interest is equivalent to a 1% balance transfer fee on a 0% interest card. I don't think this is correct, because it is not comparing like with like. For at least some people, a zero interest card would be cheaper.

    Let's take an example of a balance of £12,000. With the MBNA card you would pay no balance transfer fee and would pay off the balance over the 12 month low interest period, so you would be paying £1000 per month. (The effect of compound interest means that this is not quite the right figure, but it is close enough for the purposes of this example.) You would be paying 1.9% interest over the 12 month period, but you would only be paying this on the full £12,000 in the first month. In the second month, you would have paid off £1000 so you would only be paying interest on a balance of £11,000.

    On average, your balance over the 12 month period would be £6000 (roughly), so you would pay interest of 1.9%x£6,000 = £114. As Martin says, this is roughly equivalent to 1% of the opening balance, which is £120.

    In comparison, with a 0% card such as the Virgin card, you pay a balance transfer fee on the opening balance. In the case of the Virgin card, this would be 2.98%x£12,000 = £357. So, the Virgin card costs three times more than the MBNA card, right? NO! Only if you ignore the time value of money.

    With a 0% card, there would be no point paying off the balance gradually over the 0% period, so in order to compare like with like we should consider what you would do instead with the £1000 monthly repayments which we have assumed you would make with the MBNA card. One option would be to put these amounts in a savings account and earn interest on them (other than the small minimum payment to Virgin). After 12 months the savings account balance would be £12,000 and, if we assume you are using a best buy savings account, 3.3% interest would have earned you £198 interest. However, you would leave this on deposit for a further three months, because Virgin is interest free for 15 months, So you earn a further £100 of interest, meaning a total of £298 of interest. You can use this to pay most of the £357 balance transfer fee, which will still be sitting as a balance owed on your Virgin card, meaning that the Virgin card has only cost you a net amount of £59.

    My example ignores the minimum payments you would have to pay to Virgin, so in fact Virgin would have a net cost of more than £59, closer to the £120 cost of the MBNA card.

    The calculations would be different if the interest-free period were different, or if the savings interest rate were different or if you were a taxpayer and therefore suffered tax on the savings interest. It is possible that for some people, particularly with those who will pay tax on savings interest and who cannot get 15 months at 0%, 1.9% interest is indeed cheaper than 2.98% balance transfer fee, but certainly nowhere near as cheap as a zero interest 1% balance transfer fee (if there were a card that offered this).
    koru
  • edited 10 September 2009 at 3:55PM
    korukoru Forumite
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    edited 10 September 2009 at 3:55PM
    In relation to my immediately preceding post, having thought some more, perhaps a fairer (and easier to understand) like-for-like comparison would be to assume that on both cards you only make the minimum payments and you instead save £1000 per month in a savings account, so the savings interest is the same in both cases.

    With the zero interest card, you would pay £357 balance transfer fee and no interest for 15 months. With a 1.9% interest card, you pay £228 (ie, 1.9%x12,000) of interest over the first 12 months, but if we want to do a full comparison with a 15 month zero interest card we need to take into account months 13-15. At that point the interest-rate on the MBNA card would revert to 17.9%, so the best thing to do would be to take the savings balance and pay off the MBNA balance after 12 months. Therefore, with the zero interest card you would earn extra savings interest of roughly £100 in the last three months, whereas with the MBNA card you would earn nothing. So, after 15 months the MBNA card would cost you £228 of interest, whereas the zero interest card would have a net cost of £257.

    Therefore, if you did this, the MBNA card is a slightly better deal than a 15 month 0% interest card with a 2.98% balance transfer fee, but only slightly. However, it is not cheaper if you pay off the balance over the 12 month period as Martin suggests. Instead, if you have any cash which you could have used to pay off the balance in instalments over 12 months, you should instead put them in a savings account and benefit from the fact that you are earning 3.3% interest and paying only 1.9% interest.

    The cost advantage of the MBNA card would be bigger for tax payers, especially higher rate taxpayers. However, under no realistic scenario can 1.9% interest truly be said to be equivalent to a BT fee as small as 1%.
    koru
  • edited 10 September 2009 at 3:50PM
    fcn1fcn1 Forumite
    1 posts
    edited 10 September 2009 at 3:50PM
    Is 0% with 1.7% transfer fee for 9 months on existing Capital 1 card a good offer? Today I paid off all existing debit [£300] from last statement so as to avoid charges, but payment not showing up yet [on line banking], and I'm worried that I'm missing something and will get stung, as it seems a [too?] good offer on face value... also why have MSE.com not listed this one? I want to balance transfer from another 0% which expires this month and think it makes more sense than using my ISA to clear the debt. I have to do transfer by Sept 14. Help :confused:
  • korukoru Forumite
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    fcn1 wrote: »
    Is 0% with 1.7% transfer fee for 9 months on existing Capital 1 card a good offer? Today I paid off all existing debit [£300] from last statement so as to avoid charges, but payment not showing up yet [on line banking], and I'm worried that I'm missing something and will get stung, as it seems a [too?] good offer on face value... also why have MSE.com not listed this one? I want to balance transfer from another 0% which expires this month and think it makes more sense than using my ISA to clear the debt. I have to do transfer by Sept 14. Help :confused:
    On the face of it, it sounds good. 1.7% BT fee for 9 months is equivalent to 2.26% interest rate, so unless you have an alternative that would cost you less than 2.26% interest, the Cap 1 seems to be the best option. But, check for any catches.
    koru
  • edited 10 September 2009 at 4:35PM
    Moggles_2Moggles_2 Forumite
    6.1K posts
    edited 10 September 2009 at 4:35PM
    fcn1 wrote: »
    Is 0% with 1.7% transfer fee for 9 months on existing Capital One card a good offer? Today I paid off all existing debit [£300] from last statement so as to avoid charges, but payment not showing up yet [online banking] and I'm worried that I'm missing something and will get stung.

    If you settled your Capital One bill today, 10 September, will payment be credited to your Cap One account by 14 September, which is just two working days away?
    Also, why have MSE.com not listed this one?
    This is an existing-customer offer available by invitation only.
    I want to balance transfer from another 0% which expires this month and think it makes more sense than using my ISA to clear the debt.
    The easy way to check whether it makes sense is to plug some numbers into this calculator on the stoozing site (which is sponsored by Money Saving Expert): ;)

    http://www.stoozing.com/mon2yr.htm
    People who don't know their rights, don't actually have those rights.
  • edited 10 September 2009 at 6:08PM
    RenegMCRenegMC Forumite
    71 posts
    edited 10 September 2009 at 6:08PM
    CannyJock wrote: »
    Your current minimum repayments are 4% of the balance, so £33.35 on £833.73?

    If you transfer the balance to Virgin Money, they'll add 2.98% fee, so £24.85 bringing your balance up to £858.58. With Virgin the minimum repayment is 1% or £25, whichever is greater so basically £25.

    But if it's the minimum repayments you're worried about, the lowest min repayments at the moment are with Halifax at 1% or £5, whichever is greater so basically 1%. They have a 3% fee for 0% for 13 months.

    Now the big but ...

    You may be unlikely to qualify for a 0% card if you're unemployed. Perhaps a family member can apply for one to help you out? Risky for them maybe, but you never know.

    Thank you very much for that post - a bit late now for me to reply but nonetheless thanks!
    moggles wrote: »
    Well, you won't get a 0% BT card with an income of less than £8000 pa and even then your choice of card would be extremely limited.

    You say you've never been rejected for credit. May I ask which credit cards - besides Debenhams - you have at the mo or have held recently?

    Well I got an overdraft with Halifax, but its a student account.

    I've got a job interview on tuesday so hopefully that should make paying off the money easier. I'm having to borrow cash in the meantime.

    I have a new issue though - I'm fully borrowed out
    I've paid off some of the arrears on the CC, but theres still some outstanding that will be coming out in 3 days time, despite me explaining that I've paid what I can today and bar a miracle, I'm not about to find that kind of money till at least the next month.

    As I'm unemployed apart from long term financial hardship form, which would allow me to reduce the monthly repayment down and have various negative connotations for the credit score, is there any way of negotiating with the card company to just hold off for a month, and let me bring it back up for the next payment? Any golden keys that would help unlock such a gesture from the bank?

    Thanks again guys! fantastic work being done on this entire site.:T
    PS. worst decision of my entire financial career so far and once I'm out of this hellhole of a trap I'm NEVER getting a credit card again (unless it can't be helped - which chances are it probably cant be helped... /ramblings :))
  • RenegMC wrote: »
    I'm fully borrowed out ... As I'm unemployed, apart from long-term financial hardship form, which would allow me to reduce the monthly repayment down and have various negative connotations for the credit score, is there any way of negotiating with the card company to just hold off for a month and let me bring it back up for the next payment? Any golden keys that would help unlock such a gesture from the bank?
    Unfortunately, not. It would be marked as "arrangement to pay" on your credit file and that would affect your ability to get credit for 6 years.

    TBH, it's in your interest to work out a budget in order to pay it off as quickly as possible, rather than rely on the credit card company to impose a payment schedule.

    To help you further, we would need to know which cards - apart from Debenhams - you have at the mo or have held recently.
    I've got a job interview on Tuesday, so hopefully that should make paying off the money easier.
    Absolutely.

    Very best
    M
    People who don't know their rights, don't actually have those rights.
  • edited 10 September 2009 at 9:25PM
    RenegMCRenegMC Forumite
    71 posts
    edited 10 September 2009 at 9:25PM
    moggles wrote: »
    Unfortunately, not. It would be marked as "arrangement to pay" on your credit file and that would affect your ability to get credit for 6 years.

    TBH, it's in your interest to work out a budget in order to pay it off as quickly as possible, rather than rely on the credit card company to impose a payment schedule.

    To help you further, we would need to know which cards - apart from Debenhams - you have at the mo or have held recently.

    Absolutely.

    Very best
    M

    Thanks
    Well I hold a debenhams credit card, a halifax student overdraft of £1000 but thats at 0% and doesn't require repayments, and I'm under the limit (just!), a barclays current account, and a nationwide savings account which is savings from my parents. And thats pretty much it...

    The parents don't know about the credit card, as they would have an absolute fit! and rightly so, but I took it out and spent on it during a year of stupidity when I was younger (read naive) that I utterly regret.

    If I did tell them I'm sure they'd give me the money (after many a bollocking mind), but it's my mess and hence I'm not going to use any of their money to pay off MY debts, even for the short term, hence why I've been looking for a job to fit in over weekends between university. I know that this will incur me further debt, but I'm adamant to get myself out of my own mess. They did enough giving me shelter and food etc from 20 years and counting hence why I'd never ask them for more. They're giving me spending money as it is to finance day to day spend, and that's difficult enough. I've spent my whole youth since 16 working and earning my own packet to spend where I want, and going back from a point of relative financial independance to explaining myself to them (especially if there is debt involved) is very difficult. On top, as they don't know about the CC, they don't know about the monthly repayment, hence why it's at minimum repayments. I think I might manage for maybe 2 months cutting back on extra expenditure, but really getting my own financial freedom back is the only way I can take control hence the job.

    The reason I'm not telling them also is that I'm doing a good BSc degree at a top 5 uni, so once I'm out I don't see any reason (not being bigheaded or arrogant) for me not to get a job after (luckily economists have been rather in demand recently what with a major worldwide meltdown), so I don't mind paying a bit extra now to be able to clear my own name myself. I can't admit to them I've put myself in a messed up situation, as it'll disappoint them, give me shame, and put me in debt to them moreso, which ultimately is harder than being in debt to a faceless bank (though one pays the premium for that).

    So yeah, theres a bit of background, might be more than you were after but hey!

    Thanks Moggles!
  • RenegMC wrote: »
    I hold a Debenhams credit card, a Halifax student overdraft of £1000 but that's at 0% and doesn't require repayments and I'm under the limit (just!), a Barclays current account and a Nationwide savings account which is savings from my parents and that's pretty much it ...

    In that case, I'd concentrate on paying as much as possible off the Debenhams card. Clearing this debt ASAP will reduce the interest you pay and you'll be building a better credit history in the process. This, in turn, reduces the risk of a further interest rate hike.

    For tips, see Martin's *Credit Card Shuffle* article, steps 1,3 & 4

    http://www.moneysavingexpert.com/cards/cut-credit-card-interest

    Fingers crossed for Tuesday

    Very best
    M
    People who don't know their rights, don't actually have those rights.
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