Break Even Point on BT fees

midnite

Having been looking at this over the last few days the only risk I can see assuming that you follow the golden rules of never using your stoozing cards and always paying the minimum amount by direct debit is if you have to for whatever reason pay back the outstanding BT amount to the credit card provider urgently.

There will be a point in time whereby you will have earned enough interest to cover the BT fee and then you start to make profit. However if you pay back the balance before this point you have in effect taken on a debt of the BT fee. Is this correct?

If so does anyone have an easy method of calculating when the break even point is so that if you do have to pay some back you will have this information in your armoury.

Thanks

King_Weasel

This doesn't answer your question but I can't see what the circumstances could be where you have to repay a balance during the 0% period. You might choose to do so as the interest-free period draws to an end and your next 0% card is ready for the balance transfer, but your question doesn't apply in that case.

A pertinent, related question is whether the 0% period is long enough to justify the transfer fee. I tend to use a rule of thumb to convert the fee into an interest rate. Thus a 3% fee for a year roughly represents a 3% pa interest rate. I would need to earn at least (3/0.8=) 3.75% gross to break even. But 3% for 6 months represents a 6% annual rate, needing (6/0.8=) 7.5% gross to break even. The latter would generally only be worthwhile if I had a debt incurring a higher rate (when the adjustment for tax doesn't apply).

This method is a bit crude. Maybe someone else can suggest a simple way of improving on this.

YorkshireBoy

midnite wrote: »

If so does anyone have an easy method of calculating when the break even point is so that if you do have to pay some back you will have this information in your armoury.

I'm not sure why you'd need to know this, because if you *had* to repay early it would be because you'd contravened the T&C's and had your 0% rate withdrawn and put on the lender's typical APR.

In such a case, it doesn't matter if you've made any profit or not...your main priority should be to settle the debt ASAP and avoid the circa 1.5% per month interest that is now being applied to your account.

If you still want to see the effect (on profit) of paying off early, use the following calculator...

www.stoozing.com/calc.htm

...and play around with the 'Introductory period (months)' entry.

midnite

Thanks King Weasel and Yorkshire Boy.

Yes i suppose my question is hypothetical. However I was wondering that if you had a large credit card debt from stoozing although had the funds to cover the debit because the money is in high interest accounts etc how would this look if you applied for a mortage. How woulda potential mortage lender view this.

Martinslovechild

midnite wrote: »

I was wondering that if you had a large credit card debt from stoozing although had the funds to cover the debit because the money is in high interest accounts etc how would this look if you applied for a mortage. How would a potential mortgage lender view this?

It very much depends on the lender, but the general rule is to look at the amount of credit currently available to an applicant, i.e. if you hold several credit cards which are not currently being utilised (i.e. they're all showing a zero balance), they may assume (correctly or incorrectly) that you could go out the very next day after taking out a mortgage with them and max all of your cards out, which then restricts your ability to repay their mortgage.

Although there's no guarantee that every mortgage lender will apply this same logic, I would suggest that the parameters of borrowing large amounts of cash have changed since the credit crunch as banks now strive to minimise the amount of blood on their hands and aren't so 'flexible' with their lending. Or to look at it another way, if you worked in a bank right now and somebody came in to apply for a mortgage who had £thousands of 'debt' on credit cards, regardless of the size of their mortgage overpayment fund, would you want to lend them the bank's money?

geet

Hi, my doubt is related. After having gone thru this site for the first time, used egg as mule and took out a £6000 BT with 0% and £50 fee with M&S that will expire in March. I have been offered a credit card by Abbey (my mortgage lender) that says I can have a BT for 0% for 13 months at a 2.5% transfer fee. Should I seize this opportunity or look for NO transfer fee. I gather Capital One and Virgin are possibilities but only up to August, right? Grateful for any suggestion.

sicker

You will not get a 0 fee these days. I would take what you have been offered from Abbey and clear your M&S card if you get a large enough credit limit, if not clear as much a possible.

geet

Thanks Sicker, will do, needed that push!

CannyJock

geet wrote: »

Hi, my doubt is related. After having gone thru this site for the first time, used egg as mule and took out a £6000 BT with 0% and £50 fee with M&S that will expire in March. I have been offered a credit card by Abbey (my mortgage lender) that says I can have a BT for 0% for 13 months at a 2.5% transfer fee. Should I seize this opportunity or look for NO transfer fee. I gather Capital One and Virgin are possibilities but only up to August, right? Grateful for any suggestion.

I'd take the Abbey card, clear the M&S card, cancel the M&S card.

I'd then apply for the Virgin card for the 0% for 15 months with a 2.98% balance transfer fee and take that too

geet

Will do. But to take another one, is that possible? I mean by then my credit ratings may not be that good, right.

But a friend pointed out another offer. From Egg - 0% interest for 15 months with 3% fee. But if Egg is my mule, how do I access that?!

wayoflife

midnite wrote: »

If so does anyone have an easy method of calculating when the break even point is so that if you do have to pay some back you will have this information in your armoury.
Thanks

I always use Microsoft Excel its an easy programme to use.

Set everything out in columns, with your balance, minimum payment, monthly interest (on stoozed amount) e.t.c. all you have to do is create formulas in the columns and copying them down.

You can then keep several sheets labelled with your different cards

If you need anymore help then gime a shout!