Card comparison for foreign transaction

td_007

I have been comparing the advantage of using Nationwide cash reward card (1% cash back on spending) which does not change on foreign transactions and Sainsburys card which charges 2.75%, but has 0% interest on purchases for 12 months.

Points to remember are:
1. £1000 is spend during a foreign holiday and I have that amount in Halifax websaver account giving 4.9% interest

2. Though both cards give 56 day interest free period, I am considering 1 month for the ease of interest calculation

If the Nationwide card is used for spending £ 1000, then £10 is given as cash back and an additional £4.08 of 1 months interest after which the card will be repaid in full. Thus total cost is 1000-10-4.08 = 985.92 or saving of 14.08

If Sainsburys card is used, then it incurs a total of 1000+27.5= £1027.5. However, only a 2% minimum has to paid every month to keep 0% purchase interest advantage. This then is the sort of table I end up with:

Spend 1027.5
End of Month Remainder Interest
1 1006.95 4.20
2 986.81 4.11
3 967.07 4.03
4 947.73 3.95
5 928.78 3.87
6 910.20 3.79
7 892.00 3.72
8 874.16 3.64
9 856.68 3.57
10 839.54 3.50
11 822.75 3.43
Total interest gained 41.80

Total cost: 1027.5-41.8= 985.7 or saving of £14.3

If the savings account interest moves the gain on each of the cards

Interest Nationwide Sainsburys
4.5 13.75 10.89
4.7 13.92 12.60
4.9 14.08 14.30
5.1 14.25 16.01
5.3 14.42 17.72
5.5 14.58 19.42

Now it does not seem that interest rates will go down hence it is better to use Sainsburys card even if it charges for foreign transactions. Experts and others please comment.

Reaper

O no! Another maths fan. You guys make my head hurt!

My first observation is do you really get 4.9% on your savings? That is the GROSS rate for the Halifax Web Saver. If you are basic rate tax payer they will only pay you 3.92%. If you are a higher rate tax payer it will be even less. I'll leave you to rework the figures - I'm far too lazy!

Second if you really want to squeeze every last penny out of your holiday money the very best option is to spend the money on Nationwide then balance transfer it to a credit card that charges 0% for 12 - 18 months. In practice this is more effort than it's worth as you would have to act sharpish to organise a new card and BT before the payment date came up. I just threw it in for fun.

Galstonian

Balance transfers don't always have to be done in first few months. If you have headroom on such a 0% card then top it up with spend from other cards (such as overseas spend on the NW card). Other than that the difference is incredibly small so I don't think I'd spend any more effort on it.

johnllew

Sainsbury's give Nectar points or alternatively 0.25% cashback on their Standard & Platinum cards.

td_007

Thanks a lot folks. Seems it would be too much work for very little gain.