I am about to start a 12 month part-time course, requiring variable but monthly payments. To maximise my budget I want to pay for it via credit card, but am trying to understand which method will end up with less interest.
I have the following scenario:
- Credit card A: $0 balance, 24.99% interest rate, 90 day interest free purchases
- Credit card B: $4.5k balance, 11.99% interest rate, 55 day interest free (but the balance has not been paid in full for a long while), 3% monthly minimum repayment
- ~ $1200/month capacity for repayments
- The course will cost anywhere from $400 to $1200 (and even slightly more towards the end) each month.
My first plan was to just put $1200 each month onto card B and use the same card to pay for the course, gradually lowering the balance on B. This also covers the minimum repayment, stretching the repayment capacity a little bit more than other options.
But I figure I would pay less interest if I utilise the interest-free period on A and put the course costs on that, repay those the next month, and use the remainder (maybe $400 in a typical month) towards card B. Edit: I don't use the credit card for any other expenses, it will only be the course.
The balance on B will still decrease at the same rate, but I won't be paying interest on new purchases and will come out in front, right? Or is it purely the end balance that matters with interest, so using A just complicates things with no benefit?
Appreciate any help you can give on this. And I know that the cheapest option will be to defer the course for 6 months but that is an absolute last resort. I'm in Australia.
An edit to answer some comments: If I'm paying in cash my budget for the course is about $1065/month as I need to save a bit for the minimum repayment on the credit card. If I'm using the card though, the repayments I make will well exceed that amount, so my budget can be $1200/month.
After this course there is a second I will need to complete to be fully qualified which has sporadic commencement dates. Delaying the first course will have a snowball delay next year. I'm 29 which isn't the end of the world but all things considered I am happy to pay some extra interest, to a point, to start earlier.
I also am not eligible for the 55 day period on card B until the balance is zero.