Follow this topic Q&A » Debt

Pay off 0% interest card, or use the money to offset against mortgage and transfer the balance

by hantsgaz 17 September 2012 |

4 comments | Love

Love 0 loves

Hi all, this is my first post here so please could you help me with how I work the following out......? Here are details:

* I have £20k on a soon to run out interest free c/card.
* I have £20k sitting in my Bank Account that is being offset against against a £280k mortgage.
* The interest rate on the mortgage is 2.49%, increasing to 3.69% in Apr-13.
* if I balance transfer to a new credit card it will cost, say, £600 (assumption for this purpose is 3%) and that will then be interest free for 16 months.

So, my question is: how do I calculate what is best for my money over the next 16 months? Should I pay the c/c off, or transfer the balance to another card and continue to offset? Ideally I'd like to be able to set this up as a model in excel.

Let me know if you need anymore details.

Many thanks, Gaz.

Report

Enjoyed this? Show it some love

Retweet

Comments (4)

Facebook

Twitter

General

Comments (4)

879

MikeGG1 posted
Over 16 months the mortgage interest rate would average 3.25% and the BT rate would be equivalent to 2.25%, so the BT route would be cheaper by 1% or £200.

However, you would not be able to get a 0% card from the same stable as any of your current cards or of the previous card or any earlier cards for which you did not formally close the accounts.

Paying off the CC would not affect your credit rating but it would improve the amount that you could borrow elsewhere. Effectively, that £20K is counting twice against your borrowing potential, just as an unused overdraft limit would count.

Personally, I would consider paying it off either now or next time. I wouldn't leave it any later than that as you would run out of potential providers and risk being considered as a serial transferer.

Mike
Posted on 17 September 2012 | Love 2 loves Report
0

hantsgaz posted
Hi Mike,

Many thanks for your reply. I hadn't considered the fact that a BT could be difficult, so maybe it is prudent to pay off now. I'll probably close that c/card account straight away too, so if I need to ever borrow a substantial sum again in the future I'll have that card issuer to potentially use again.

Rgds, Gaz.
Posted on 19 September 2012 | Love 0 loves Report
879

MikeGG1 posted
Gaz

Don't forget that it is the whole Group and not just the one card.

Mike
Posted on 20 September 2012 | Love 0 loves Report
0

challian posted
Was doing the same. i offset £16k at 5% in 2008. i believe there are 5 independant companies doing the cc. As long as you keep them seperate you'll be ok. virgin/barclaycard/citigroup etc but you may find they slightly lower the balance transfer amount by a couple of k's everytime. I use to pay £35/month on 16k. its now 6k at £50/ month.

Lastly look to somewhere where you get a better return then your offset. my offset is 0.75% above base. Personally i have now invested mine into btl. returns are 10-15% and improving. i keep buying until the int rate increases. doesn't matter when it happens. at the mo i have 5 in the last 4 years. let me know if you want to know the model i'm using for the returns I get.

you could always use the website that lends part of yr money out at tidy rates the basically undercuts the banks. maybe zopa????

anyhow. going out now so good luck!
Posted on 21 September 2012 | Love 0 loves Report

Post an answer

Something you're dying to ask... or answer?

Get started now

Sign in for a better Q&A

Registered already? Great! You can just sign in to ask and answer questions.

W3C Thank you for using CGWEBLIV2