4.9% vs 0% advice balance transfer card

[sovietchild]

Hi, I have a sum of money to transfer to a balance transfer card.
I most likely will not be able to clear the amount in the 12 month 0% period.
There is a 4.9% for 48 months.

Now the 0% has a 5% fee and the other option does not have any fee other than the 4.9%apr.
I could clear the balance in 13 months meaning that the interest would be cheaper than the upfront fee at 0%.

Am I looking at this the right way? Cheers

 

[theropod]

@sovietchild The 4.9% interest card wins if you pay over 12 months, due to the 5% fee on the 0% card. For a £1000 example, split over 12 months:

0%+5% fee:
£1000+£50 fee =£1050 payback

4.9% interest
£1000+~£25= £1025 to pay back.

As the 4.9% interest will be calculated daily, paying it off over 12 months you’ll effectively be paying half the rate over the year. If you take 13 months it’ll just be a couple of pounds more, thus still winning. If you have an extra month on the 0% card then you’ll be paying the standard rate, which these days is often 25-30%.

I’d go for the 4.9% card

 

[sovietchild]

@theropod !thanks I think I shall go for the 4.9%

 

[resjudicata]

@sovietchild Not exactly

If say you owe £1000

The 0% balance transfer will charge you £50 on day one

The other card will charge you interest daily or monthly on a reducing balance. So the first month will cost £49/12 = £4.08. But thereafter, should you pay the balance down, less interest will be charged.

Say by month two you get to £900 - at this point you only pay £3.68 in interest.

So in my opinion, if you're really trying to get rid of this debt, the 0% balance transfer is probably the worst option here by a good bit.

As long as you don't carry the debt for longer than 13 months of course...

 

[sovietchild]

@resjudicata !thanks

 

[anneparker]

@sovietchild What is the rate after the 0% rate ends?

 

[svenya]

@anneparker Can't you just balance transfer again to a 0% care when it ends anyway?

 

[anneparker]

@svenya I'd imagine you would find a familiar 5% fee, right?

 

[jimineez]

@sovietchild Sounds like you’ve got the same offer I had with MBNA.

I took the 4.9% with no fee to help with a loan that was at a higher %.

 

[sovietchild]

@jimineez Yep the same offer, cheers.