How do they get away with it

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I needed a new gas boiler and borrowed £2,600 off my credit car (cash) which has a higher interest rate and mentioned that I would be paying this off in Feb/March this year. When I came to pay it back I was told they could not divide the balance between purchases and cash for me to pay the cash loan back. So I paid the amount off my purchases. I am not left with two lots of interest, which amounts to a normal monthly payment. If they can separate the interest then why cannot they separate the amounts for someone to pay it off, like if someone buys from a shop on credit and then pays it off in full. I am in dispute with my Bank at the moment and it could well go to the Fin Ombudsman. Is there anyone out there who has had a similar problem and how was it resolved. Martin do you have any thoughts on this.
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  • benf90
    benf90 Posts: 590 Forumite
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    They 'get away with it' because it's in their T&Cs.

    It's widely known that many credit cards operate like this. If you didn't know, then it was an expensive mistake to not read the T&Cs and/or check before you took out cash.

    I doubt the FOS will find in your favour, unless you specifically asked if any payments would go towards cash first.

    If you just said "I'll be paying it off" the person you spoke to may just think you mean the whole balance.
  • CLAPTON
    CLAPTON Posts: 41,865 Forumite
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    Most CC do this I'm afraid .. they use your momnthly payments to pay off the debt with the lowest interest rate first.
    ... one or two don't e.g. the nationwide CC.

    If you can get another CC, preferrably one with low life of balance or 0% for a decent period then you could consider BTing the amount over.. but obviously don't use the CC for purchases until the BT is fully paid off or you'll be back to square one.
  • bert&ernie
    bert&ernie Posts: 1,283 Forumite
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    I needed a new gas boiler and borrowed £2,600 off my credit car (cash) which has a higher interest rate and mentioned that I would be paying this off in Feb/March this year. When I came to pay it back I was told they could not divide the balance between purchases and cash for me to pay the cash loan back. So I paid the amount off my purchases. I am not left with two lots of interest, which amounts to a normal monthly payment. If they can separate the interest then why cannot they separate the amounts for someone to pay it off, like if someone buys from a shop on credit and then pays it off in full. I am in dispute with my Bank at the moment and it could well go to the Fin Ombudsman. Is there anyone out there who has had a similar problem and how was it resolved. Martin do you have any thoughts on this.

    That's a lot of money for a gas boiler - either you live in a mansion or you've been had. Twice it would seem, if you didn't check the allocation of payment rules for your card.

    Allocation of payments is usually set to work in favour of the lender - effectively they "protect" the higher rate balances by allocating payments first to interest and fees, then to to the lower rate capital balances. In addition to being part of the T&Cs, these rules are normally outlined in the summary box that is included in marketing materials, so it is likely to be difficulty to claim that the lender hasn't drawn your attention to them.

    I doubt that you will get anywhere with the ombudsman. It wont do any harm though and, if enough people complain, the government may take action in future. However, I think you will need to chalk this one up to experience.

    Best practical advice is to try and BT the balance to another card, as CLAPTON has said.
    The whole problem with the world is that fools and fanatics are always so certain of themselves, but wiser people so full of doubts.
  • nickmack
    nickmack Posts: 4,435 Forumite
    First Anniversary Combo Breaker First Post
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    I needed a new gas boiler and borrowed £2,600 off my credit car (cash) which has a higher interest rate and mentioned that I would be paying this off in Feb/March this year. When I came to pay it back I was told they could not divide the balance between purchases and cash for me to pay the cash loan back.

    In addition to the above comments about payment hierarchy, I'd also say, it's nearly always a bad idea to take cash from a credit card.

    Not only does the amount get 'stuck' accruing interest at a higher rate if you have an existing balance, but increasingly cash advances are reported and shown in your credit report. This is like waving a flag to any potential creditor saying you are in financial difficulty.

    The only solution for your situation, I can see is to pay off the balance in full, using a balance transfer to another card with a promotional rate if necessary.

    For future reference, Nationwide and Saga both offer cards with a positive payment hierarchy (i.e. debts accruing the highest rate of interest are paid off first)
  • Robert_Sterling
    Robert_Sterling Posts: 2,207 Forumite
    edited 20 April 2009 at 4:42PM
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    bert&ernie wrote: »
    Allocation of payments is usually set to work in favour of the lender - effectively they "protect" the higher rate balances by allocating payments first to interest and fees, then to to the lower rate capital balances. In addition to being part of the T&Cs, these rules are normally outlined in the summary box that is included in marketing materials, so it is likely to be difficulty to claim that the lender hasn't drawn your attention to them.

    Even though your attention has been drawn to the terms and conditions it is still the case that the terms & Conditions are not reasonable and therefore they could be challenged in my humble opinion.

    Wot a Chiz
    ..
  • FannyHill
    FannyHill Posts: 504 Forumite
    edited 20 April 2009 at 1:52PM
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    When I transfer a balance from one credit card to another I first make sure the card has nothing outstanding on it,and once the new balance is there I put the card away and don't use it.
    I will only use it again after I've paid off the whole amount.

    I recently transferred a balance to an RBS credit card because it offered a low monthly interest rate of 0.325% for the next six months but I notice that the fee for transferring it which is £135 is incurring an interest rate of 1.527% per month and is classed as a purchase. :eek:
  • Moggles_2
    Moggles_2 Posts: 6,097 Forumite
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    FannyHill wrote: »
    I recently transferred a balance to an RBS credit card because it offered a low monthly interest rate of 0.325% for the next six months, but I notice that the fee for transferring it which is £135 is incurring an interest rate of 1.527% per month and is classed as a purchase.

    Whilst the majority of lenders now charge balance transfer fees (a trend started by MBNA), few currently charge interest on handling fees.

    Capital One, Citi, Co-op, HBOS, HSBC and MBNA have never charged interest on BT fees.

    Egg
    and Barclaycard have now dropped the practice.

    This leaves Royal Bank of Scotland (which includes Mint and NatWest cards) and LloydsTSB. These providers treat BT fees as purchase transactions, so you will incur some interest.
    People who don't know their rights, don't actually have those rights.
  • FannyHill
    FannyHill Posts: 504 Forumite
    edited 20 April 2009 at 4:00PM
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    Thanks for that.


    A while back when I transferred a balance to my MBNA credit card I don't remember them charging interest on the transfer fee, so when I got the RBS first statement after transfer I thought that's strange a transfer fee described as a purchase.


    You try and read all the info before doing a balance transfer and sometimes still miss something. :o
  • bert&ernie
    bert&ernie Posts: 1,283 Forumite
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    Even though your attention has been drawn to the terms and conditions it is still the case that the terms & Conditions are not reasonable and therefore they could be challenged in my humble opinion.

    Wot a Chiz

    You could try to argue that the terms are unfair. Good luck with that one.
    The whole problem with the world is that fools and fanatics are always so certain of themselves, but wiser people so full of doubts.
  • PROLIANT
    PROLIANT Posts: 6,396 Forumite
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    You could play the "tim nice but dim" act with the bank and see if they will meet you half way, or you could try crying on the phone and see if that works.
    Since when has the world of computer software design been about what people want? This is a simple question of evolution. The day is quickly coming when every knee will bow down to a silicon fist, and you will all beg your binary gods for mercy.
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