I’ve recently taken out my first loan but not in the traditional sense. The boiler replacement for my flat in Aberdeen has finally gone ahead and soon it will be time to stump up the cash (how much I’m not actually sure at the moment due to some shoddy workmanship/practices). Sadly moving to London, while being unable to rent out the property, has eaten up all of the savings that I had managed to accumulate so in readiness I’ve done a £4k money transfer on a new MBNA credit card that I applied for.
Now if you don’t know exactly what a money transfer is you’re probably sitting there going “Is she crazy putting that kind of money on a credit card? I thought she was supposed to be more savvy with money than that!” but actually it makes perfect financial sense as it will definitely cost me less money in the long run.
What is a money transfer? (From moneysavingexpert.com)
A few special credit cards let you pay money straight into your bank account for a fee, yet you still get the special cheap transfer interest rates. Therefore, you now have the cheap debt on the card and the cash in your bank account. Even the cheapest high street loan to borrow £2,000 is 14.9% representative APR. But, if you can pay it off within two-and-a-half years, doing a money transfer and paying for whatever you were planning to buy with the cash will cost you just a 4% fee. That works out at an APR of about 3.3%.
So I have the £4k in the bank (currently earning me 3% interest in my Santander 123 account) and I have 31 months in which to save the money to pay it off, which works out at £135/month. You just have to remember to pay at lease the minimum amount each month and it even helps your credit rating. Much more affordable than a regular expensive loan! If you’re really clever you can also use this tactic to do what we call stoozing but I’ll save that topic for another post some time else.