Amex Blue, Worth It?

JohalaReewi

You are in the right ballpark with the min payment and interest rates you use (i make it £103 clear after tax). However, if the min payment was 5% and you only got 4% interest and you were a 40% tax payer then you would be better off with a 1% cashback card.
The key element is the min payment %age. You need this to be as low as possible to maximise the amount you can pay into the savings account which needs to have the highest interest rate possible (obviously). However, you do have to find another 12mth 0% card next year to repeat the exercise.

Brighty

Don't know where the £20 difference comes from, but even if it is £103 thats alot more than any cashback card (1% would give £60), next year if there are no 0% purchase cards about, i will get a cashback card. But for this year sainsburys card is far better so long as you are a 20% tax payer and you pay the money into a decent savings account. Also when my years up i could do a BT to a new card and stooz the balance ;D

westernpromise

I just worked it out, assuming a £500 a month spend, deposited at 5.35% in my A&L Savings account (assuming monthly interest) paying the minimum payment each month of 3% (i assumed £15 and mutiples there of for simplicity) After the 12 months is up, i'm left with over £125 after tax at 20% on a 6k spend. I make that 2.08%. What am i missing?

Brighty

Nothing, you're right. I just went back and reconstructed my calculation. It was correct for a 6-month 0%-on-purchases deal. For the full 12 months, which wasn't around when I last did the maths, the benefit is as you state. The extra 6 month freebie ratchets the value up nicely.

Doesn't the Sainsbury's one pay 0.25% cashback on top too? If so, the card is worth 2.33% cashback.

Compares very favourably with a Platinum Amex, though you have to work harder to get it.

Martin, are you listening? This approach seems to the best deal of the lot.

westernpromise

The key element is the min payment %age. You need this to be as low as possible to maximise the amount you can pay into the savings account which needs to have the highest interest rate possible (obviously).

How do you make that out?

Upping the min payment to 5% makes very little difference, according to my calculations.

With a min of 3%, you acquire an average stash of £2,918.

Change it to 5% and your average stash falls to £2,722.

This 7% reduction in what's in the kitty lowers the interest 'take' by 7% also, i.e. by £11 (from £156 to £145). That in turn reduces what I'll call the 'synthetic cashback' by 7%, i.e. to 1.94%.

Still very attractive.

The most damage is done by the higher tax rate. On a 3% min, the cashback value falls to 1.56% and on a 5% min it's worth a mere 1.46%.

That said, these are still pretty good. As a standby card, used when they won't accept your Amex, it's a pretty healthy rate.

JohalaReewi

Have got a spreadsheet which does a reasonable model of this but can't post the output as a table Getting 5.35% interest (credited annually) with 3% min payment works something like:

In month 1: Just spend £500
Start month 2: CC bill for £500, min pmt £15 save £485
In month 2, accrue interest £2.16, spend £500.
Start month 3: CC bill for £985, min pmt £29.55, save £470.45
In month 3, accrue interest £4.26, spend £500.
Keep going until 12 months are up:
In month 12, accrue interest £20.52 spend £500.
Start month 13: CC bill for £5102.63. Balance in savings account £4602.63
You can either take out savings and add £500 to pay CC bill in full, or do a balance transfer to a new 0% card.
The interest accrued is £129.36 Note this will be over 11 months because you didn't save anything in month 1. Probably why there is £20 difference in my calcs.

Anyway. You get more than a cashback card and it really is cash (not a rebate). So I agree. Should be up there as a 'best buy'. The only problem is the amount of debt you are rolling up on the credit card which could hit your credit limit. £500 a month seems OK but if you spend £1000 a month the final CC bill is over £10000.

westernpromise

Note this will be over 11 months because you didn't save anything in month 1. Probably why there is £20 difference in my calcs.

That figures, but what I didn't get was the significance of the minimum payment level. 3% didn't seem markedly different from 5%. Not that it matters, strictly speaking, as the choice of 0%-on-purchases cards doesn't (to my knowledge) include one requiring 5% to be repaid.

The only problem is the amount of debt you are rolling up on the credit card which could hit your credit limit.

Yes, not only is the value constrained by the credit limit, but there is also the risk around having that large unpaid balance. You could get rejected for the 0% BT card you're going need after the 12 months.

My previous conclusion was that this and 0% balance swapping are "either / or" strategies. One can probably do both for a while, but your apparent debt position may exhaust the supply of 0% lenders sooner.

As a first card, which you then switch into a normal 0% strategy, it makes sound sense.