Help with balance trans calcs please!

tightasagnats

I currently have 3500 on a 4.9% credit card for the life of the balance. I have a new card which is 2.9% for 2 years - but will incur @ 2.5% balance transfer fee.

Assuming I pay £80 per month, which works out better for that 2 year period?

(does anyone have a formula I can use?)

Many thanks
T

YorkshireBoy

2.9% for 2 years with a 2.5% BT fee sounds like HSBC? If so, £80 a month won't be enough since, as it requires a 2.5% minimum payment, you'll start off paying...

(£3,500 x 1.025) x 2.5% = £89.69 per month (and that's without the interest!).

As to which is cheaper, the HSBC site has a calculator at: http://www.hsbc.co.uk/1/2/popups/credit-card-calc;jsessionid=0000PeeNeFUvWo1rt6oXW5P3037:11j56r6g2

However, you may find this calculator offers more features:

http://www.stoozing.com/btcalc.htm

tightasagnats

Thank you YB, I was basing the payment on what I pay now with Barclaycard. Presumably I'd be better off with a 0% 12 month deal with 2.5-3% BT fee and then find another after 12 months?

Best wishes
T

Milarky

Going back to the original comparison of an existing life of balance at 4.9% and a 2 year 2.9% with a fee of 2.5%....

This is a poor alternative. Although you would have marginally reduced the debt over 24 months by about £10 [having made total payments in that time of £1617] you then have a remaining debt of £2127 - which, with the HSBC, offer goes straight back up to standard rates of interest. You'd simply be jumping into the fire two years from now.

For that offer - you're better off where you are

Presumably I'd be better off with a 0% 12 month deal with 2.5-3% BT fee and then find another after 12 months?

No. For the same reason. You trade a slightly lower interest rate (allowing for the fee) for only 12 months 'security' when you have 'lifetime' of security as it is.

0% deals are not suitable unless you can be sure of repaying them at the end of the promotion. For dedicated 'stoozers' this is never a problem - as they have no real debts. For 'rate tarts' it's more complicated but I think it boils down to relative certainties. If I was in your situation with a LOB balance, I would try to successfully 'stooze' against a new card offer whilst keeping the existing card offer going - in other words bank the 0% card for 12 months, earn a bit of interest net of taxes and fees and use that profit to slightly offset the cost of the life of balance card. That way you 'risk' only not being able to repeat the 0% offer whilst safeguarding your current position altogether.

tightasagnats

Yes I see, that is helpful. I have an Egg Money so I could do a BT from the new 0% card...keep my 4.9%....earn a little, use that. Lovely.

bandraoi

The other disadvantage of doing a balance transfer is that you're locking in the loss.

To transfer to the new card you have to pay 2.5% interest on your outstanding balance up front. On your current card you won't have paid that for another 6 months or so.

If, in the meantime, something good happens to you, a pay rise, a bonus at work, an unexpected gift from a relative, an insurance pay out etc. and you can pay off some or all of the debt, you've cost yourself some money.