Beware overlapping card promotions !

Consumerist

I am currently enjoying the benefits of a 0%–on–purchases promotion on one of my credit cards. It has been quite profitable for me to defer settlement of the balance over the past nine months whilst a fixed-rate introductory offer on a savings account has held the money. I have paid only the minimum card repayments during the promotion. Sadly, this card promotion must be settled by the March 2009 statement date.

Recently, however, I have received another promotional offer on the same credit card. It now offers 0% interest for up to nine months on all purchases made during February and March 2009.

At first sight this looks like a great opportunity to load up the card again and sit back for nine months.

The booby trap

Let's assume I load up the card during February and March. Those purchases will be interest free for the next nine months. So far, so good.

But what about the outstanding balance I still owe on the previous 0% promotion? After the March statement date I will start to pay interest on this amount. Now, here's the rub – from that March statement date, anything I repay is first applied to balances at the lowest rate of interest. The lowest rate of interest will then be on those purchases I recently made to load up the card for nine months.

The upshot is that, after the March statement date, I would not be able to settle the balance on the previous promotion (on which I would then be paying interest at the standard rate) until I had first repaid all those new purchases with which I have just loaded the card in the expectation of paying 0% interest.

Fortunately, I saw this booby trap before falling into it. This kind of tactic is so typical of today's banks.

The lesson

To avoid this form of ambush, the lesson is simple :–

Ensure that any existing promotion has been repaid in full
BEFORE making any purchase whatsoever under a new promotional offer on the same card.

To be absolutely sure, wait till you get a statement showing a zero (or credit) balance before making any purchases at all under a new promotional offer on the same card.

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clio

would this be from Virgin as i had an offer like this on monday??

shoppaholic_returns

Mbna,have also done one

Robert_Sterling_3

Savvy people make money from credit card companies by stoozing.
Savvy credit card companies make money from customers as indicated in the original post.

anotherpaul_2

I have a similar offer from Abbey (MBNA) too.

Interestingly the T+Cs seem to say that, if there are multiple promotional balances on the card at the same interest rate, payments are made against the promotion that ends FIRST. So, I think, if I pay enough to cover the first promotion before it ends, the payment will be applies to that and I will be left with a balance on the second promotion.

However, if I don't clear the promotion before it reverts to the standard rate, any payment clears the second promotion first, so interest will be due.

I tried to confirm with them that I had interpreted the T+Cs correctly, and they quoted the T+Cs to me. Not all that helpful...

Consumerist

There seems to be a common thread here - MBNA.

I'd be interested to hear if it's something to look out for more generally.

Anyone know of other banks (spit) trying this one on ?

sarahs999

It's an old trick. Lots of them do it - it's a slightly more sophisticated version of 3 months' interest free on purchases combined with 12 months on a balance transfer - your purchases get trapped winding up interest for the whole remaining nine months. Of course, the key to the OP post is either clear the card or BT right now, then take advantage of the second offer once the card is clear (always check carefully to make sure the balance really is clear...)

Consumerist

anotherpaul wrote: »

Interestingly the T+Cs seem to say that, if there are multiple promotional balances on the card at the same interest rate, payments are made against the promotion that ends FIRST.

I've had a closer look at my Ts&Cs and they do seem to say something similar. Accordingly, I would say that you are quite correct to assume that, so long as you pay off all of the balance of the first promotion before it expires, no interest will be chargeable even if you have made purchases during the second promotion.

That's more like it.

Best general advice then is to make sure that Ts&Cs do indeed contain that provision.

Unfortunately for me, I had a small purchase on my statement at the start of the first promotion but it was made before the promotion period had started. The only way I can pay this off is to settle the balance in full at the end of the first promotion before making any purchases under the latest promotion. Just my bad luck, I guess.
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anotherpaul_2

Consumerist wrote: »

Unfortunately for me, I had a small purchase on my statement at the start of the first promotion but it was made before the promotion period had started. The only way I can pay this off is to settle the balance in full at the end of the first promotion before making any purchases under the latest promotion. Just my bad luck, I guess.

I have something similar - we moved house and when my girlfriend phoned to change the address on her car insurance, they charged a small amount to my card. The interest should be tiny, but it gets rounded up to £1. Still, I can live with £1 per month for a £5500 almost interest-free loan. I could probably have phoned and asked them to refund it and charge a different card, but it wasn't worth the hassle.

Consumerist

anotherpaul wrote: »

I could probably have phoned and asked them to refund it and charge a different card, but it wasn't worth the hassle.

The rub here, though, is that any refund would have repaid the balance at the lowest interest. So that refund would have been deducted from the promotional balance not the non-promotional balance.

Seems to me we could with a Dirty Tricks of the Trade page on this site.

Any takers ?
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