Am I Better off Paying The Minimum Credit Card Balance

tooblue on 05/06/2017 - 22:02

My Credit Card company is currently offering 3% pa rate for six months. My home loan is on 4% pa rate and all my funds are in the offset account. Am I 1% better off if I take this offer and pay the minimum credit card balance?

I understand if I don't pay off the full amount I will lose the interest free period but have 1% risk free return on my purchase, although negligible? What I am planning is to put this money in other investment. The bottomline is I am not worse off (paying more intest on credit card than saved on home loan) even if I leave the money in the offset account doing nothing.

Financial

Comments

  • User102430 on 05/06/2017 - 22:16
    +1

    Yes, you are.

  • realfancyman on 05/06/2017 - 22:39
    +1

    not really worth it for 1% saving but sure you could do it

  • garetz on 05/06/2017 - 23:18
    +1

    AS long as you pay the balance before the 6 month period, then yes you are better off.

    • ESEMCE on 06/06/2017 - 07:44
      -1

      ^This…
      If you read the fine print I would not be at all surprised to see that if you don't pay the full amount down before the 6 months expires, they add on all the interest you would otherwise have paid at the full rate for the 6 month promotional period.
      In which case you'll be far worse off!

      • [Deactivated] on 06/06/2017 - 10:43

        If you read the fine print I would not be at all surprised to see that if you don't pay the full amount down before the 6 months expires, they add on all the interest you would otherwise have paid at the full rate for the 6 month promotional period.

        Have you actually ever seen that in the terms and conditions?

        How would they even calculate the 'interest you would otherwise have paid at the full rate'? Given that there's normally a monthly minimum payment amount, purchases accruing at different rates to the balance transfer, etc.

        • ESEMCE on 06/06/2017 - 10:44

          I haven't seen the Terms and Conditions of this particular offer, so no.. That's why I prefaced the statement with "I would not be at all surprised"
          But it's a pretty standard tactic for these type of offers.

        • [Deactivated] on 06/06/2017 - 10:50

          @scubacoles:

          I haven't seen the Terms and Conditions of this particular offer, so no

          I wasn't asking about this offer.

          But it's a pretty standard tactic for these type of offers.

          Example? I've read lots of T&Cs for balance transfers but never come across something like you're describing.

        • [Deactivated] on 06/06/2017 - 11:01

          @scubacoles:

          How about a link to an actual balance transfer offer in Australia.

          Edit: None of the links on the google search actually describe what you're suggesting about having to pay the entire interest, if you prepay early.

        • ESEMCE on 06/06/2017 - 11:15

          @sp00ker:
          I never mentioned anything about Balance Transfers, nor did OP.
          Nor did I say that you'd have to pay interest if you pay out the principal.

          If you pay the minimum repayment as proposed by OP, you will not pay the principal out in full unless you pay a lump sum on the eve of the Interest free period ending.
          For many interest free/honeymoon rate offers, it is common to have a Deferred Interest clause..
          It's common enough that it has it's own Industry terminology! And it's prevalent in Australia too.

        • [Deactivated] on 06/06/2017 - 11:18

          @scubacoles:

          Fair enough - I just re-read what you wrote …

        • ESEMCE on 06/06/2017 - 11:32

          @sp00ker:
          On looking around I can't find any Australian examples, so possibly they've closed that horrible little backdoor here.
          Still prevalent overseas though.

  • j4ice on 05/06/2017 - 23:35
    +3

    Not knowing the amount you're dealing with makes it hard to judge.
    Let's assume a reasonable amount of $20000 BT, the interest savings over six months would only be around $100. If you take into consideration the rewards programs that you can't take advantage of during this period and if you don't have another credit card to help you keep money in the offset, the advantage can be minimal if any.
    Personally, I would not consider the hassle of a BT unless it is at least 2.5% lower than my current home loan rate.
    Not financial advise but a personal view.

  • haha on 06/06/2017 - 01:23

    Negative gearing?

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