Jobs & Education2 mins ago
Moving money between credit cards
3 Answers
I have a few credit cards. I am now paying interest on them. I have a bit of credit on each and get offers for '0% on balance transfers'. If I was to move some of the balance of Card A, to the spare room on Card B, as 0% transfer, and then move some balance from Card B, back to Card A, would it transfer the amount I am paying interest on? I have received letters to say that payments on my cards will now go to pay off the highest interest amount first. Does this still count for balance transfers?
I hope this is clear what I mean?
thanks
I hope this is clear what I mean?
thanks
Answers
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It will save you money in doing what you propose.
Let’s say for example that you have two credit cards A and B, each of which you owe £1,000 and are paying a hefty 20% interest p.a. 20% on £2,000 equals £400 interest a year – or £200 per card (or about £100 per card over a 6 month period).
Now suppose each card is offering you 6 months interest free balance transfers (for a 3% fee). So you transfer £1,000 from card A to card B. This will cost you £30 (3% of £1,000) – Card B now has a zero balance, and card A has £2,000 owing, for which you are paying 0% on £1,000 and 20% for the other £1,000. You now transfer £1,000 from card B to card A. The net result of this is that each card has a £1,000 balance at zero % (for 6 months), each of which has cost £30 (total £60), saving you around £140 over the six month period.
An important condition of each credit card is that by its terms and conditions, the higher percentage credit must be paid off first. I believe that this is now a mandatory condition for UK credit cards – in the past, cards paid off the lowest % credit first.
If at the end of the 6 month 0% interest period – you can find another card supplier offering 0% for a 3% fee – then you will have reduced the interest paid on your credit cards from 20% p.a. down to around 6% p.a. saving you around £280 over the year - in the above example.
Let’s say for example that you have two credit cards A and B, each of which you owe £1,000 and are paying a hefty 20% interest p.a. 20% on £2,000 equals £400 interest a year – or £200 per card (or about £100 per card over a 6 month period).
Now suppose each card is offering you 6 months interest free balance transfers (for a 3% fee). So you transfer £1,000 from card A to card B. This will cost you £30 (3% of £1,000) – Card B now has a zero balance, and card A has £2,000 owing, for which you are paying 0% on £1,000 and 20% for the other £1,000. You now transfer £1,000 from card B to card A. The net result of this is that each card has a £1,000 balance at zero % (for 6 months), each of which has cost £30 (total £60), saving you around £140 over the six month period.
An important condition of each credit card is that by its terms and conditions, the higher percentage credit must be paid off first. I believe that this is now a mandatory condition for UK credit cards – in the past, cards paid off the lowest % credit first.
If at the end of the 6 month 0% interest period – you can find another card supplier offering 0% for a 3% fee – then you will have reduced the interest paid on your credit cards from 20% p.a. down to around 6% p.a. saving you around £280 over the year - in the above example.
I do this quite often - when a 0% offer comes to an end and I go back to the standard rate, I look at my other cards and move the sum to the one offering the best rate. It usually costs though - the transfer fee can (for example) be £150 for a £5000 transfer. However you then pay 0% on the balance until that next offer runs out. Hymie's answer really explains it clearly.
Different cards have different habits for paying off the balance, but more are moving to paying off the item with the highest interest, first.
Different cards have different habits for paying off the balance, but more are moving to paying off the item with the highest interest, first.
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