Blancing Credit Cards

[andy-hughes]

Here is a an argument someone may be able to settle -

I was chatting with a friend about credit cards.

He has two cards on which he has borrowed large amounts of cash, so is repaying at high interest.

On one card, he has got the balance down to less than £500, but on the other, he still owes more than £8,000.

If he transferred £3,500 from the top-heavy card to the smaller debt card, and had an even £4,000 on each to repay, would that reduce his overall interest payments as he repaid a smaller balance off by installments?

I think in theory it would, but I am no expert, so I thought I'd ask for clarification so I can offer something other than a guess.

Anyone who knows and can advise please?

[jno]

it might depend on the interest rates they charge? I wouldn't bet that all cards are the same.

[andy-hughes]

jno - understood - I am just looking at a hypothetical so I can say either -

If the rates are comparable, then yes, this would reduce overall interest charges,

or

It doesn't matter if the rates are comparable, it makes no difference, it's still six of one.

[woofgang]

same rate, no diff......if one rate is lower than the other then load the lower rate card.....but don't go on the razz on the higher rate card cos that way lies madness.

[andy-hughes]

Thanks woof.

What we pondered was, if one has a higher capital sum to repay, does that mean that the interest rate on it is higher as well, but if they are equal capital sums, then assuming the interest rates are comparable, then the rate on the card with the higher sum will be reduced by the re-balancing.

Does that sound reasonable?

[Peter Pedant]

Hi Andie I dont know the answer so I will blaaaart long and loud - it is after all AB

if card A has interest rate 1% and card B had 5% then all the debt should be on card A

but practically speaking
there may be hidden charges - less hidden as the years go on as the Banks are being forced to be more honest with their little tricks
and that involves things like transfer charges, charges for cash and so on

People who swap and swap are called "rate tarts" and these are tolerated because ..... the money is made when they make mistakes such as - - - being a day late to transfer so they trigger charges

debt is bad

[alavahalf]

Your friend would then still have a debt of £8.500 regardless of how many cards it is spread over.
His best bet would be to apply for another credit card, that has 0% interest rate over the maximum amount of months available.. Do a balance transfer of £8.500 onto the new card with a one off balance transfer fee to pay .. often between 2-3%.
Under no circumstances can he use the new card to make any purchases. This card is purely a vehicle to make sure that every penny he pays back actually goes towards reducing the debt.

In recent years I had to bail someone out to the tune of £7.5K .
I applied for the card in my name as their credit rating was shot.
The transfer fee was approx £210 and they had 31 months to clear the debt. Whereas prior to that they had been paying approx £160pm interest to the card issuer. So only about £40 of their £200 monthly re-payment was going towards the debt, the rest was interest.
Now with the new card, it was the full £200 going towards the debt. It doesn't take much working out.

https://www.moneysavingexpert.com/credit-cards/balance-transfer-credit-cards/

[andy-hughes]

Thanks alav - I will suggest that, it sounds like a much better plan.

[royfromaus]

If he has a good credit rating (and a job) he could get a loan.

Many banks doing 3.3

£8000 Total amount payable £8,407.30
£233.54