Credit card -v- savings

The safest way is to pay off the balance as soon as possible - there will be no extra interest so any money you throw at the debt will be used to reduce the amount owed.

If you are disciplined however you can save yourself a bit more money - only pay off the minimum balance and put any extra money aside into a dedicated savings pot that can earn some interest. Keep this money aside to be used ONLY to pay off the credit card debt when the 0% period ends. You will get to keep any interest earned. This is stoozing, and should only be done if you are certain you will be able to resist dipping into the savings pot and pay your card off in time otherwise the 1-3% earned will be lost by the 20+% interest rate of the credit card.

If you are organised, you will earn the most interest by making the minimum payments during the 0% interest period and save the rest of the money you are currently using to pay over the minimum in an interest earning savings account. Then just before the 0% interest free period ends, use your savings to pay off the remaining balance.

However, if there is a risk that you'll forget to pay off the card before the 0% interest period ends, then the interest you'll pay on the card will probably be vastly more than the interest you'll make on the savings. In that case, I'd work out how much you should set your monthly repayments to be to ensure that you've paid off the entire balance by the end of the 0% interest period. Keep your current savings available as emergency savings to use rather than resorting to paying for emergencies on the credit card!

If you cannot afford to set your monthly repayments high enough to pay off the entire balance by the end of the 0% interest period, then you could use your savings to make up the shortfall. But it is also important to have some emergency savings available to avoid needing to use credit cards for future emergencies!

Odd how long I have been on these forums and only spotted this sub-thread today. We once "stoozed" quite a bit, but poor savings rates mixed with high balance transfer fee's stopped us from doing it a long time ago.


Say your spending is £600 a month on the card. From that they would require a minimum of around £20 a month (assuming 3% minimum). So you "could" put £580 into one (or many) of the accounts offering 3-5% PA.


Lets say that you can manage multiple ones and get an average of 4% PA. And assume your spending £600 per month (normal spend) and have the ability to pay the minimum (assumption again of 3% balance) and bank the rest.


12 months in you would have debt showing of £5,940, have earned £136 in interest.
24 months in you would have debt showing of £10,060, have earned £468 in interest.


So look at it closely and ask yourself if your going to earn enough for it to be worth the hassle.


£10k+ of credit card debt can be hard to achieve for people who don't have great credit. People who have great credit (and high limits) are probably not as eager to make this amount of money for the amount of hassle that it takes. So really it boils down more to you than anything.


Hope I didn't make things too confusing! My wife says I am a confusing person.

jcontest wrote: »

Odd how long I have been on these forums and only spotted this sub-thread today. We once "stoozed" quite a bit, but poor savings rates mixed with high balance transfer fee's stopped us from doing it a long time ago.


Say your spending is £600 a month on the card. From that they would require a minimum of around £20 a month (assuming 3% minimum). So you "could" put £580 into one (or many) of the accounts offering 3-5% PA.


Lets say that you can manage multiple ones and get an average of 4% PA. And assume your spending £600 per month (normal spend) and have the ability to pay the minimum (assumption again of 3% balance) and bank the rest.


12 months in you would have debt showing of £5,940, have earned £136 in interest.
24 months in you would have debt showing of £10,060, have earned £468 in interest.


So look at it closely and ask yourself if your going to earn enough for it to be worth the hassle.


£10k+ of credit card debt can be hard to achieve for people who don't have great credit. People who have great credit (and high limits) are probably not as eager to make this amount of money for the amount of hassle that it takes. So really it boils down more to you than anything.


Hope I didn't make things too confusing! My wife says I am a confusing person.

Which accounts do you mean? I've stopped stoozing because I can't find accounts to put the money in that make it worthwhile. I've 2 tsb classics and an HSBC for the regular saver. Am swapping Tesco who have cut their interest for RBS for the intro bonus. I have just bought a car partly on 0% cc but I'm looking at paying it off because I can't find anywhere to stooze the money.

bsms1147 wrote: »

You'll make more money ('maximize') by paying only the minimum payment each month, and ensuring that the credit card is paid off in full at the end of the 0% period

I have a 20-month 0% on purchase card (1800 limit, 360 ulitilized so far). My funds are in a Regular Saver (1000+, 3%) and an instant savings account (400, 1.5%).
I plan on doing the Christmas shopping on the CC, make the minimum payments (25/mo), and clear it once the regular saver matures.