Rolling CC balances for zero interest

Fire away

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Does anybody use zero interest balance transfers on credit cards as a means of cheap credit. I put 8k on my credit card 12 months ago for some home improvements. It was zero interest for 12 months so happy days just pay the minimum 1% repayment each month. So this month I transferred the remaining balance circa 7k onto a new card with different vendor for another 12 months interest free. Obviously I never used the card for anything else in the period and no clue what my card number is. I don't plan on using the new card for anything else either. I could easily pay balance off from savings but since its interest free. In another 12 months plan on rolling it again for interest free promo so that will be 3 years interest free.
 

losttheplot

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Is it worthwhile? Would be if you could get a decent return on savings. But it you're not getting anything on the savings you're not saving much by doing it.
 

Fire away

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If you leave savings in bank no, but I have used the capital to purchase car from uk which I flipped for 2k gain and a small few quid on the market
 

Laughahalla

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I did this in the past when I was useless with money. It's just moving money around and it's not clever. You still owe the money.

Pay it off with your savings and close the credit card. You don't need one.
 

dingoxh

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I did this in the past when I was useless with money. It's just moving money around and it's not clever. You still owe the money.

Pay it off with your savings and close the credit card. You don't need one.
I disagree. It's free credit and why not use it to your advantage. If you can for example contribute an extra €100 a month to your mortgage payments to pay down the debt a bit quicker, why not borrow €1200 interest free and throw it at the mortgage in the beginning and then pay off the CC debt at €100 a month interest free. That way you save on mortgage interest long term.
 

Laughahalla

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Simple answer is Human nature. Nobody is that disciplined and what will happen for at least 50% of people is that they'll end up owing on their credit card and be paying northwards of 17% for their time and effort.

The amount gained versus the risk is not worth it.

What happens when the person borrowing on their credit card loses their Job and cannot payoff the credit card. Paying 17%+.

Playing around with money like this is dangerous. Credit card companies know exactly what they're doing and know human nature and behaviour better than everyone. It's a con to think you won't get suckered eventually.

People don't need credit cards. I binned mine over a year ago. Not one occasion did I go, you know, I wish I had my credit card.
If you need to use a credit card you probably can't afford to buy the item anyway... Use a debit card.

There is a reason it's called "Master"Card .
The borrower is slave to the lender.
 
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RedOnion

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I disagree. It's free credit and why not use it to your advantage. If you can for example contribute an extra €100 a month to your mortgage payments to pay down the debt a bit quicker, why not borrow €1200 interest free and throw it at the mortgage in the beginning and then pay off the CC debt at €100 a month interest free. That way you save on mortgage interest long term.
Just using your example so we understand exactly the savings.

Assume 3% interest rate on your mortgage so we're at the higher end.

Either way you're paying an additional 1,200 in the year, so the savings are only in the first year. After year 1 you're saving the same amount.

Paying off lump 1,200 saves 36.00 in interest.
Paying 100 per month saves 19.50 in interest.

So the effort of doing it saves you 16.50. but, you don't actually save that. You need to firstly get the cash from a credit card to repay your mortgage. So there's a cash advance fee - mine is 1.5%. so now I've paid 18.00 fees.

Next I need to transfer that balance onto a 0% balance transfer card. Bit of paperwork, let's say 20 minutes of my time. 0% is for 6 months, so I need to remember to do another balance transfer to another new card in 6 months. More paperwork, let's say another 20 minutes of my time.
So, ignoring the stamp duty (let's assume I've a credit card anyhow), I've lost 1.50, and had to switch credit card twice.
 

dingoxh

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Just using your example so we understand exactly the savings.

Assume 3% interest rate on your mortgage so we're at the higher end.

Either way you're paying an additional 1,200 in the year, so the savings are only in the first year. After year 1 you're saving the same amount.

Paying off lump 1,200 saves 36.00 in interest.
Paying 100 per month saves 19.50 in interest.

So the effort of doing it saves you 16.50. but, you don't actually save that. You need to firstly get the cash from a credit card to repay your mortgage. So there's a cash advance fee - mine is 1.5%. so now I've paid 18.00 fees.

Next I need to transfer that balance onto a 0% balance transfer card. Bit of paperwork, let's say 20 minutes of my time. 0% is for 6 months, so I need to remember to do another balance transfer to another new card in 6 months. More paperwork, let's say another 20 minutes of my time.
So, ignoring the stamp duty (let's assume I've a credit card anyhow), I've lost 1.50, and had to switch credit card twice.
I used 100 a month to illustrate an easy example. I wouldn't advise doing it for 1200 a year. Also , to be clear I have borrowed money in this way but not to use against a mortgage. I used it for another significant purchase for which I knew I would be getting a windfall later in the year to clear the debt before interest would be charged. However, let's scope it out with some real numbers.

Reality is if you have the cash to chip an extra say 5k a year off your mortgage, then it may be worth considering.

In regards to getting your hands on the money, the CC company deposits the funds into your current account and not on the card as a positive balance, so there is no cash advance fee. The new CC does not ask to see your "old" CC with a balance for them to clear.

Don't have my mortgage calculator on me now, but front loading 5k extra a year versus dripping it in on a 300k variable 3% over 25 years? Where is the pinch point to move to a fixed rate. I.e. if you saw 2.3 fixed, is that a better deal than front loading at 3%?

There is no reason why you cant repeat this exercise year after year assuming you can get a CC with a facility for a balance transfer. In reality , they should rename the product "free loan" as it is not dependent on debt on another card
 

dingoxh

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Simple answer is Human nature. Nobody is that disciplined and what will happen for at least 50% of people is that they'll end up owing on their credit card and be paying northwards of 17% for their time and effort.

The amount gained versus the risk is not worth it.

What happens when the person borrowing on their credit card loses their Job and cannot payoff the credit card. Paying 17%+.

Playing around with money like this is dangerous. Credit card companies know exactly what they're doing and know human nature and behaviour better than everyone. It's a con to think you won't get suckered eventually.

People don't need credit cards. I binned mine over a year ago. Not one occasion did I go, you know, I wish I had my credit card.
If you need to use a credit card you probably can't afford to buy the item anyway... Use a debit card.

There is a reason it's called "Master"Card .
The borrower is slave to the lender.

Because you have overpaid with the lump, you can pull back.

I am not saying though there is no risk....but it can be a money saving technique if you are diligent
 

RedOnion

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4,458
In regards to getting your hands on the money, the CC company deposits the funds into your current account and not on the card as a positive balance, so there is no cash advance fee. The new CC does not ask to see your "old" CC with a balance for them to clear.
Ah, so the whole venture starts with a 'balance transfer', but there was no original balance to repay in the first place? Some of the companies transfer the money directly to your other credit card(s).

Assuming a constant 3% for the life of the mortgage, and overpayment of 5k per annum, reducing term rather than repayment amount, you'd save 1,585 in interest by repaying the 5k in a lump sum at the start of the year (every year) Vs overpaying 417 per month.

But you'd need to do the balance transfer at least 19 times (assuming 12 months interest free is available). But most are shorter. And we're still assuming it can be transferred to your current account, with no cash advance fees.

I am not saying though there is no risk....but it
If you don't have the funds available to repay it, there's risk. I've posted previously about a friend who used credit cards to pay the deposit on a property purchase. This was pre 2008. It all worked beautifully doing 0% balance transfers, until suddenly there were no more. He was paying 20% interest on a 30k balance, while his property lost 50% in value.
 
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dingoxh

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Ulster deposit the funds directly into a current account. It was a surprise to me too that they did this. I have heard annecdotely that other banks also deposit into a current account.

€1585 is not to be sniffed at. Not a life changing amount of money but every little helps. You are essentially using the banks money to increase your wealth.

What do you mean by 19 times? Don't follow...

Agree with you on the risk. Like I said though, if you do this you have overpaid your mortgage so you can pull back on that without risk. Also, this should only be done manageable/modest amounts of money not a life changing amount
 
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