Halifax CC balance transfers and PPI - something to be aware of / watch out for!!

SmarteningUp

Hi Guys

I'm new to the forum (and taking a more proactive approach to managing my finances) so please accept my apologies if I'm sharing anything that is already common knowledge.

For the past 4 years I've held a credit card with Halifax, initially taken out to transfer a (very) large balance that I unfortunaley ran up on another credit card (egg), taking advantage of a rather attractive life of balance deal being offered by Halifax (6.95% for the life of the balance).

My long term goal being to make steady repayments to reduce this debt and eventually ditch the card completely.

So when transfering my debt over to the halifax, I commited myself to never spending or making any new purchases on the card until the existing balance had been paid off, which given the size of the debt would take quite some time!!

Taking into account the pitfalls of negative repayment hierarchy (where the lender uses repayments to pay off any debts on the card attributed with the lowest rates of interest first), the above decision seems to have been a very wise move and indeed it seems to have become standard advice / wisdom that when transfering a debt onto a 'life of balance' credit card, you should avoid making any new purchases on it in order to avoid falling foul of the negative repayment hierarchy terms that may be applied to your card by your lender.

However whilst I've stuck to my guns and never made any 'intentional' purchases or new transactions on the halifax credit card, I have fallen foul of the negative repayment hierarchy by rather frustrating means. Allow me to explain...

When taking out the halifax credit card online, wishing to be more responsible with my lending, I ticked the box asking 'do you wish to cover your repayments with credit card repayment protection?'

Thinking (at the time) that this was a good idea, I ticked the box (actually I can't quite remember if the box was already ticked or whether I ticked it, but that's another matter), on the understanding that my debt would be 'covered' by this insurance at the rate of 79p per £ of the outstanding debt.

I also understood that my minimum monthly repayments on the credit card would consist of the monthly interest plus the amount of the monthly repayment protection premium (approx £50 per month, giving an idea of the amount my original debt transfered on to the card).

However what I was not explicitly made aware of at any point, is that these repayment protection premiums would actually be applied to my account as new transactions at the associated rate of 22.95% per annum.

So as I've been making steady monthly repayments for the last 4 years to reduce the amount of my original debt, the amount of my monthly repayment protection premiums have been added to my account at the rate of approx £50 per month.

When taking the effects of the halifax's negative repayment hierarchy into account, whereby all of the monthly payments I have made (including the monthly premium demanded for the insurance cover) have been applied to my 'original debt' (having the lowest interest rate of 6.95% applied to it), this slowly mounting 'new debt' that has come as a result of my repayment protection premiums has steadily been attracting an interest rate of approx 22.95%

Why so annoyed with this;

1) When taking out the repayment protection it was never made clear to me that the premiums would be added to my credit card each month as new transactions and this certainly is not made obvious in the confusing layout of of the halifax's CC statements which fail to make clear or sum up 'new transactions' made each month, which would have perhaps alerted me to this issue sooner.

2) The fact that the halifax demand you pay the monthly insurance premiums as part of your minimum monthly repayment also gives the impression that you are actually paying for this cover on a monthly basis and that it's not actually hitting your credit card.

As it stands, when trying to manage a long term debt on a 'life of balance' cedit card deal where it's not expected that you will not be able to pay off the full amount of the balance each month (hence the 'life of balance' deal), when taking out credit repayment protection insurance with the halifax, you'll not only be required to pay for this insurance each month (at a rate of 79p per £ of your outstainding balance), but ultimately, as these premiums are added to the balance of your account and will not be reduced until you pay off your orginal debt in it's entirety, you'll end up paying interest on these insurance premiums at 22.95% for years to come too.

Having just caught on to this following a rather interesting discussion with a halifax call centre advisor last night (as a result of my enquiring about the different rate sof interest that appear to be applied to my account) I am of course cancelling my repayment cover with immediate effect, intending to obtain alternative cover elsewhere.

But cosidering the amount of interest I must have accrued as a result of this little administrative 'ruse' over the years, I thought that this was well worth pointing out to others. The take home lesson being, when switching cards to take advantage of a 'life of balance' deal, be sure to avoid making any new transactons on the card, either intentionally or unintentionally (i.e. do not purchase your repayment cover from the halifax!!!!)

Incidentally, whilst the above has angered me quite a bit and it does seem incredibly 'unfair', I'm not sure if the halifax are actually doing anything wrong here (other than taking advantage of my ignorance). However if they are breaking any 'rules' or doing anthing naughty, I'd appreciate it if anybody could point out their misdoings