It pays to do the maths
In the world of personal finance, it isn’t always immediately obvious when something is a good deal.
But spending a little time with a calculator generally sorts things out.
A correspondent writes: “I am considering transferring a balance of (several credit cards) £721 plus adding £482 (for carpets) to an Abbey 0% interest card deal. It lasts till March 2008.
“The snag is that they are charging £37.50 for the total amount. I did tot up my interest on the cards and it comes to £96 over 9 months.
“The alternative is just to use my savings from my Isa. What do you think?”
The key thing is to compare the £37.50 balance transfer cost with the amount of Isa (individual savings account) interest that would be lost if it was used to pay off the debt now.
If this is more than £37.50, it’s worth making the transfer and clearing the debt with Isa cash after nine months. If the lost interest is less than £37.50, it’s better to clear the debt now.
Say the Isa interest rate is 6 per cent. That will be worth £54.14 on £1,203 (the total debt) over nine months, so it would be best to leave the Isa cash alone until the end of the interest-free period.
Investing a bit of time working these things out not only makes you feel more on top of your finances – it saves you money too.
