Interest free credit cards - advice please
Discussion
I’m after advice on ‘free’ credit card transfers.
I’m in my dotage but have little knowledge of financial matters, especially loans and in particular credit cards. I have one but rarely use it other than online and generally pay it up at the end of the month, so getting the money for nothing. I’ve never failed to pay the required amount.
I want to buy a s/h car for about £15k. I’ve saved >£5000 so am looking for a way of funding the remainder. I have more than enough to cover it in longish term investments, but that’s where I want to leave it. I know that if I take it out I won’t put it back for some time.
I see advertised these credit card transfers where there is no interest on the sum for periods up to all but four years. What’s to stop me buying the car via the credit card and then, before the month is out, transferring the £10k to a new credit card? I could pay the money off in a couple of years or so.
There must be some ‘catch’ but I don’t know enough to work out what.
Nothing too technical in replies please. As I say, I know little and what I’ve read online is permeated by jargon.
Six years ago I had a demand from HMRC for all but £10k in a little over a week. I went for a bank loan. I was stunned to discover that I didn’t have an excellent credit rating, despite not having any debt. I was told by the person arranging the loan that once I’d paid it all off my credit rating would increase. I was and remain confused by this as it seems counter intuitive. My credit rating is 992. Means nothing to me.
I’m in my dotage but have little knowledge of financial matters, especially loans and in particular credit cards. I have one but rarely use it other than online and generally pay it up at the end of the month, so getting the money for nothing. I’ve never failed to pay the required amount.
I want to buy a s/h car for about £15k. I’ve saved >£5000 so am looking for a way of funding the remainder. I have more than enough to cover it in longish term investments, but that’s where I want to leave it. I know that if I take it out I won’t put it back for some time.
I see advertised these credit card transfers where there is no interest on the sum for periods up to all but four years. What’s to stop me buying the car via the credit card and then, before the month is out, transferring the £10k to a new credit card? I could pay the money off in a couple of years or so.
There must be some ‘catch’ but I don’t know enough to work out what.
Nothing too technical in replies please. As I say, I know little and what I’ve read online is permeated by jargon.
Six years ago I had a demand from HMRC for all but £10k in a little over a week. I went for a bank loan. I was stunned to discover that I didn’t have an excellent credit rating, despite not having any debt. I was told by the person arranging the loan that once I’d paid it all off my credit rating would increase. I was and remain confused by this as it seems counter intuitive. My credit rating is 992. Means nothing to me.
This should help for a start:
http://www.moneysavingexpert.com/credit-cards/best...
The rest of the web site is very informative and should help you out a lot. Also, remember you don't have 'one' credit rating as such. Different companies giving credit look for different things, where you're declined by one company you may be accepted by another. You can get a good idea if you'll be accepted before you apply for the card too using the checking system which doesn't affect your credit rating(s).
http://www.moneysavingexpert.com/credit-cards/best...
The rest of the web site is very informative and should help you out a lot. Also, remember you don't have 'one' credit rating as such. Different companies giving credit look for different things, where you're declined by one company you may be accepted by another. You can get a good idea if you'll be accepted before you apply for the card too using the checking system which doesn't affect your credit rating(s).
Have a quick browse on the money saving expert website, there's tons of articles aimed at folk just like yourself which explain every financial aspect you can think of in simple layman's terms, I've found it a life saver!
What you are referring to I believe is known on there as 'the credit card shuffle' whereby you transfer all your existing debt onto an interest free card, then before the interest free period has ended you switch to a different one to maintain a 0% interest on the balance. It's not completely free as the transactions usually incur about a 2% charge but it's still substantially lesa than the cumulative interest would be.
In your position you just need to ensure your credit rating is kept up so you've got the freedom to switch at the end of the term, and to fund a car purchase you'll need to double and triple check whatever card your applying for has the interest free promotion on either money transfers or purchases, most of them are only balance transfers which you can't purchase a car with. If your current card has a 15k limit however you could purchase the car with that and transfer the balance to an interest free one immediately.
Don't apply for credit cards straight off either, the mse website has an eligibility checker which is a sort of dummy run to tell you what cards you're likely to get without negatively affecting your credit rating by logging a load of searches at once.
What you are referring to I believe is known on there as 'the credit card shuffle' whereby you transfer all your existing debt onto an interest free card, then before the interest free period has ended you switch to a different one to maintain a 0% interest on the balance. It's not completely free as the transactions usually incur about a 2% charge but it's still substantially lesa than the cumulative interest would be.
In your position you just need to ensure your credit rating is kept up so you've got the freedom to switch at the end of the term, and to fund a car purchase you'll need to double and triple check whatever card your applying for has the interest free promotion on either money transfers or purchases, most of them are only balance transfers which you can't purchase a car with. If your current card has a 15k limit however you could purchase the car with that and transfer the balance to an interest free one immediately.
Don't apply for credit cards straight off either, the mse website has an eligibility checker which is a sort of dummy run to tell you what cards you're likely to get without negatively affecting your credit rating by logging a load of searches at once.
The 'gotcha' with interest free transfers on credit cards is that they often charge you a fee for the privilege of moving the money - 3% is typical. Doesn't mean it not worth doing, just work out costs against a loan.
The other point is not to spend anything else on the card you've transferred to, as the card company will use any payments to reduce the interest free amount not the purchase that then attracts interest at the standard rate.
Also, you are unlikely to get a credit limit that would enable you to buy the car on a new credit card.
Finally, make sure whoever you buy the car from will accept a credit card payment without charging you extra (or allowing it at all).
The other point is not to spend anything else on the card you've transferred to, as the card company will use any payments to reduce the interest free amount not the purchase that then attracts interest at the standard rate.
Also, you are unlikely to get a credit limit that would enable you to buy the car on a new credit card.
Finally, make sure whoever you buy the car from will accept a credit card payment without charging you extra (or allowing it at all).
Thanks again for the help, guys. I'm off to do some reading.
That's what confused me. My bank was advertising a rate which was very attractive; it would easily have cost less than taking money at short notice from my investments. When I was told it was not available to me because of my credit rating I thought that the advertised rate was probably not available to anyone but bank managers. I complained to the branch manager. After a short but confusing argument about my lack of evidence - 29 years of mortgage not being enough it seemed - he got onto 'head office', according to him, and obtained a slightly higher rate than the advertised one which I accepted.
Now that I've had a loan my credit rating is higher. It seems daft to me. I was employed, with a decent income, with savings and no debt, apart from the last year or so of my mortgage. They should have been pestering me with offers.
Excuse my rambling, but my daughter got into financial difficulties after a split with her partner and I paid off her debts. This seemed to trigger an avalanche of offers for credit cards to her.
Credit is a bit like Haldane's universe: it is not only stranger than I imagine, it is stranger than I can imagine.
Cheers, guys.
drainbrain said:
Derek Smith said:
I was stunned to discover that I didn’t have an excellent credit rating.......... My credit rating is 992.
Assuming it's an Experian rating you certainly have an excellent score now. It only goes to 999.Now that I've had a loan my credit rating is higher. It seems daft to me. I was employed, with a decent income, with savings and no debt, apart from the last year or so of my mortgage. They should have been pestering me with offers.
Excuse my rambling, but my daughter got into financial difficulties after a split with her partner and I paid off her debts. This seemed to trigger an avalanche of offers for credit cards to her.
Credit is a bit like Haldane's universe: it is not only stranger than I imagine, it is stranger than I can imagine.
Cheers, guys.
timbo999 said:
The 'gotcha' with interest free transfers on credit cards is that they often charge you a fee for the privilege of moving the money - 3% is typical. Doesn't mean it not worth doing, just work out costs against a loan.
The other point is not to spend anything else on the card you've transferred to, as the card company will use any payments to reduce the interest free amount not the purchase that then attracts interest at the standard rate.
Also, you are unlikely to get a credit limit that would enable you to buy the car on a new credit card.
Finally, make sure whoever you buy the car from will accept a credit card payment without charging you extra (or allowing it at all).
I'm pretty certain the bit in bold here is wrong.The other point is not to spend anything else on the card you've transferred to, as the card company will use any payments to reduce the interest free amount not the purchase that then attracts interest at the standard rate.
Also, you are unlikely to get a credit limit that would enable you to buy the car on a new credit card.
Finally, make sure whoever you buy the car from will accept a credit card payment without charging you extra (or allowing it at all).
I believe the law changed a few years ago to prevent providers from doing this.
Link
It's difficult to get that much credit on free cards immediately in my experience. To get 10k on cards you would need 2 maybe 3. They tend to increase the credit limit a little later on, nearer the end of the interest free period term in hope you'll smash a load of money on it and run out of time on the interest period.
The other main factor for purchasing with cards is you need to be purchasing from somebody who can accept credit cards (dealer) and they will charge a % fee for the privilege, it can be a considerable amount running into hundreds of pounds depending on the value of the purchase.
If you decide to go with the credit card route, you will have a period of time at which you will pay no interest on the amount on the card anywhere from 12-29+ months, you will have still make the minimum payments each month. At end of that interest period, you can if you want to pay off the balance in full before you start incurring interest at standard rate, or you can transfer the balance on the card to another credit card to repeat the cycle again. The transfer will incur a fee ~circa 3%+ typically. If making the minimum payment on 10k and balance transferring the amount out at the end of each period I think it will end costing more in the long run in balance transfer fees.
I've previously used credit cards with your intentions but for a house refurb instead. I went about it slightly different and just divided the total amount on each card by the amount of months given interest free and made the payments accordingly so that by the final payment on the last interest free month the balance is settled. You've then just spread X amount over X months/years and it's cost you nothing (except the purchase fee if applicable).
Loans are also very cheap at the moment, Sainsburys were at around 2.8% last time I checked and definitely worth considering and comparing to credit card fee costs involved in purchasing.
The other main factor for purchasing with cards is you need to be purchasing from somebody who can accept credit cards (dealer) and they will charge a % fee for the privilege, it can be a considerable amount running into hundreds of pounds depending on the value of the purchase.
If you decide to go with the credit card route, you will have a period of time at which you will pay no interest on the amount on the card anywhere from 12-29+ months, you will have still make the minimum payments each month. At end of that interest period, you can if you want to pay off the balance in full before you start incurring interest at standard rate, or you can transfer the balance on the card to another credit card to repeat the cycle again. The transfer will incur a fee ~circa 3%+ typically. If making the minimum payment on 10k and balance transferring the amount out at the end of each period I think it will end costing more in the long run in balance transfer fees.
I've previously used credit cards with your intentions but for a house refurb instead. I went about it slightly different and just divided the total amount on each card by the amount of months given interest free and made the payments accordingly so that by the final payment on the last interest free month the balance is settled. You've then just spread X amount over X months/years and it's cost you nothing (except the purchase fee if applicable).
Loans are also very cheap at the moment, Sainsburys were at around 2.8% last time I checked and definitely worth considering and comparing to credit card fee costs involved in purchasing.
There are other people out there, Zopa for example, who will do a "soft" credit check and come up with a rate which you can then decide whether to go forward with or not. That avoids you having multiple credit searches on your file, which wont help your rating. If you hit their highest scores, Zopa will lend you 10k for 5 years at 3%, which while not quite as cheap as a fee + balance transfer on one of the very best deals isnt far off and is a lot less hassle.
There are a few 0% interest or 0% balance transfer (with no fee) cards out there, I've used them as it's basically free money. You just have to make sure to make the minimum payment each month and remember to pay it all off once the 0% term expires.
However... you'll almost certainly get charged a credit card fee by the dealer you're buying off, so you might be better off with a personal loan instead.
However... you'll almost certainly get charged a credit card fee by the dealer you're buying off, so you might be better off with a personal loan instead.
I was in a similar situation last year. £19.5k car purchase, £6.5k part exchange value, £3k spare cash in the bank.
The best option that I could find at the time was a £10k Tesco personal loan at 3%. All arranged over the internet in a few minutes, documentation arrived a couple of days later, money in my bank within a week.
I paid for the car by bank transfer, so no fees from the dealer.
The best option that I could find at the time was a £10k Tesco personal loan at 3%. All arranged over the internet in a few minutes, documentation arrived a couple of days later, money in my bank within a week.
I paid for the car by bank transfer, so no fees from the dealer.
GregK2 said:
Definitely a personal loan situation rather than a credit card.
There's 2.8% loans available from a few lenders now, not that you're guaranteed those rates.
Why?There's 2.8% loans available from a few lenders now, not that you're guaranteed those rates.
Even if it's on 2 cards - so what? You can get transfer fees close to 0%. It's not rocket science to manage 2 payments a month and the cards give you ultimate flexibility to pay it off at any time and vary the amounts every month if you want to.
Virgin gave me a £10.7k limit straight off the bat without me asking.
rossub said:
GregK2 said:
Definitely a personal loan situation rather than a credit card.
There's 2.8% loans available from a few lenders now, not that you're guaranteed those rates.
Why?There's 2.8% loans available from a few lenders now, not that you're guaranteed those rates.
Even if it's on 2 cards - so what? You can get transfer fees close to 0%. It's not rocket science to manage 2 payments a month and the cards give you ultimate flexibility to pay it off at any time and vary the amounts every month if you want to.
Virgin gave me a £10.7k limit straight off the bat without me asking.
There's pro's and cons to both I accept though.
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