Current Account Mortgages - Would this be a good idea

Myself and the hubbie are thinking about changing to a current account mortage.

We'd both get paid into this current account, the plan is then:

to live on the Credit Card during the month, hence keeping the balance on the Current Account very healthy, the day we are paid in month 2(and subsequent months), pay off the Credit Card in full, so as not to imply any interest charges...A friend of mine was saying that this is how they use Current Account Mortgages in Oz...would this work positively in reducing the mortgage quickly??

In theory, it should work fine and seems like a good idea. However, do you think you'll be able to resist the urge to throw even more expense than before onto your credit card i.e. more luxury items as you'll be more used to using it for day to day purchases?

the problem happens the month you don't pay off the credit card , the only way I could see you doing it is to have a direct debit to cover 100% of the balance....

Cyrstal said:

Myself and the hubbie are thinking about changing to a current account mortage.

We'd both get paid into this current account, the plan is then:

to live on the Credit Card during the month, hence keeping the balance on the Current Account very healthy, the day we are paid in month 2(and subsequent months), pay off the Credit Card in full, so as not to imply any interest charges...A friend of mine was saying that this is how they use Current Account Mortgages in Oz...would this work positively in reducing the mortgage quickly??

Click to expand...

could this method also be combined with utilising the various 0% interest periods from various CC providers, such as UB (9 months), Tesco (6 months), BoSI (6 months), etc, etc. not sure of how to organise it, but sounds interesting (or 0% interesting, so to speak).

Sounds good - would be pretty interested in doing this myself ...

Probably the best idea would be to have a cradit limit to match your monthly salary (or even a little less!) - therefore you could not overspend on the credit card. Then have a direct debit from the current account to pay off the credit card in full at the end of each month - thus incurring no interest on the credit card.

Is there anyone out there who is doing something similar to this?

Re: Current Account-Would living on the Credit Card for the month be a good idea??

The only thing about swopping and changing Credit Card Accounts would be the issue of the Government Credit Card Charge of 40 euro.

Budapest, am really strict with the Credit card, so extras shouldn't be a problem(I hope !!)

Does anyone with a Current Account Mortgage do this presently?? Just want to make sure I'm not missing something obvious out before diving in!!

Don't think there should even be a problem with government stamp duty as in the case of transferring your credit card to MBNA anyway, if you send them a letter saying you've paid the 40 euro for that year already, they won't charge you again. Also, if you stayed with Ulster Bank and spend over 6,000 per year (which it sounds like you would easily) then they will reimburse you the 40 euro.

I'm thinking the same but just to check my calculations,the CAM is currently 3.54%,so you would save 3.54Euros for every 1000 you have per month,so say you have a float of 5K per month using the credit card this way then you'd save 17.70 Euros plus reduce your capital by that amount?

I'm not sure how you're working it Pennypincher...

This is how I thought it would work:

You only pay on interest on the balance of your Mortgage,
So for instance if your mortgage was 100,00( I wish !!)
If you had a float of 5K in your current account, you would only pay interest on 95K and not the full amount?

So if the interest was
3.54% of 100,000 which is: 3540
3.54% of 95,000 is 3363
This is a saving of 177 euro by having the floating money

So this means that the bigger the float you could have in the CAM the better??

Am I calculating this right, or is it too simplistic a view??

Yes 177 Euro over 12 months....sounds about right.

Would be complicated enough without switching credit cards, especially as you have to be setting up new direct debits every time you changed in order to ensure you always clear the balance.

Selfbuilds plan seems the best with least risk of things going wrong

It sounds good in theory, but I think even better if you took the money that you're going to spend from your visa-account and put it into the current account as well, and although you will be taking money out of it there will be a substantial amount in there to begin with. Depends of course on if the interest is calculated daily....

Just had a look at the First Active webpage - assume that's the one you're talking about? The current acount mortgage APR listed there is 3.6%. With that rate you'd actually be better off with a tracker of 3.4%. On 100000 the latter saves you 20Euro per year over the other opiton. But please correct me if I'm wrong!

Petal is right - focus on the rate you are paying before worrying about features like the current account offset.

Petal,

I think you mean €200 not €20 but I agree entirely with your point. Even if you had, say, €2000 on average in the offset current account that would generate only €72 in interest. Not enough to offset (ahem!) the higher interest rate...........

Pity really, because the current account mortgage is an excellent idea in principle.

The advantage of the current account mortgage is that you are effectively a saving on DIRT TAX. This in my situation outways the lower interest rate in a tracker mortgage and puting the difference on a regular deposit account.