Using a 0% credit card to offset your mortgage costs requires some research. Choose your card carefully.
Following an article last week about how some people were borrowing on 0% interest credit card deals and using the money to offset their mortgages, I've had some queries about how to do it on a practical level.
Offset mortgages work by using money held in savings and current accounts and setting it against mortgage debt. So, instead of earning interest on your cash, you pay less interest on your mortgage borrowings.
The game the people are playing is to borrow as much as they can on a 0% credit card and put the money towards offsetting the mortgage for the duration of the 0% deal. At the end of the promotional rate, they withdraw the relevant amount from their mortgage and pay back the card. It has cost absolutely nothing to borrow the money but it's been used very effectively to reduce the mortgage costs.
The key is to look for a credit card that allows you to pay off loans and overdrafts as well as ordinary credit card balance transfers. For example, Egg will make a payment directly into your bank account while Marbles issue blank cheques that you simply fill in yourself.
Not all cards will let you do this - a case in point is that Halifax will only allow you to transfer a real existing balance from another credit card so you do need to choose your card carefully.
For help in locating which particular cards offer the right facility, pop over to our credit card discussion board.
Find out more about great Credit Cards and Offset Mortgages.
