Access bond vs credit card

[Nerfherder]

So we have a bit of a cashflow problem at the moment and we need a bit of breathing space. We have about 190k that we have put in extra on our bond but it's not accessible at the moment as the access bond has not been activated yet. When we phoned our personal banker she advised rather raising our credit card limits instead of taking off the bond... Even though we are 190k ahead in our payments. All our savings are put on the bond.

It really baffels me how she says that a credit card is better. Her reasoning is that the because the amout we want is only 30k it would be better to extend the credit limit because the interest over a few months is less then what we would be saving by having extra on the bond. Also because the interest is calculated per day so you should only really take off your bond if you are going to replace the money right away.

I get what she is saying, if we had not put extra money on the bond then credit card debt is better. But how can it be better if you are just accessing money that is just covering your interest.

At the moment the bond is still quite young and so the interest payment is quite high but the amount that the interest drops when we pay in extra is still very low, so low that I'm sure it's less than the equivalent credit card payment.

We would probably pay back the debt in about 4 months

 

[ToxicBunny]

Do you sums...

What would your bond repayments increase by if you removed the money, and what would the credit card repayments be...

Assume you're going to pay it off in the same period of time. I would personally guess that the bond would be a better better in terms of lower overall interest charged IF you are paying it back in a short space of time.

 

[JayM]

The credit card route is better...for the bank. Take the money out of your bond.

 

[Agent_Smith]

Access bond all the way! I've dipped into my access bond (for settling my car, paying off my cc and starting up a small business - all told about R65k) and my repayment for my bond has only gone up around R700 a month. Avoid the CC like the plague!

 

[HavocXphere]

Seems like a private banker lite edition you got there. Its both bad and wrong advice...

You'd pull the funding from the source with the lowest cost (i.e. lowest effective interest rate). Thats the access bond. All that other crap is just that.

 

[ToxicBunny]

On another note, I would have actually be phoning your private bankers manager and requesting a new banker that is actually vaguely intelligent be assigned to your account.

 

[jerome000]

Request an expected cash flow for the 4 months on credit card vs bond.

 

[Colin62]

What interest rate are you paying on your bond, and your credit card? If the difference is small, and you're only talking of a short while, the credit card may not cost a lot more, and may be a whole lot less hassle (for your banker).

 

[Viper25]

Access bond all the way! I've dipped into my access bond (for settling my car, paying off my cc and starting up a small business - all told about R65k) and my repayment for my bond has only gone up around R700 a month. Avoid the CC like the plague!

Have to agree with this. I have done this many times too.
I was a bit surprised that my monthly repayment went up after withdrawing money from my access bond, but I guess it kinda makes sense.

 

[Humberto]

Wouldn't dipping into your bond mean that you are paying interest over a long period (possibly of the order 20 years) for what's supposed to be a short-term expense?

 

[Goliath]

The credit card route is better...for the bank. Take the money out of your bond.

Yep, what he said.. not a very smart personal banker eh?

 

[mister]

I would think whichever option offers the least interest p/a. In addition, which option will put you at least risk when re-payments possibly becomes an issue. Help me out if I am wrong, but I know that your bond will charge the least interest. Servicing the bulk [/URL]of the extra repayments on your bond should not affect you as badly as a cc extension. I would go for the bond, make repayments to the same amount as cc and if cash flow gets tight revert back to the calculated payments for the bond.

A one post wonder that posts an intelligent answer, and embeds an irrelevant spam link?

 

[the eskimo]

Depending on your provider, there may be a fee associated with an access bond.

If there's no fee, go with the lower interest rate. If there's a fee, you need to check your sums first.

 

[bwana]

A one post wonder that posts an intelligent answer, and embeds an irrelevant spam link?

You really don't need to quote spam.