0% purchases and 0% transfer

eskaiem

Just applied for Tesco Clubcard Credit Card which currently has 0% on purchases for 12 months. Got it as I plan to purchase a few items (£1000 worth) that I don't then have to pay for until next year (besides the minimum payment). At the same time I put in a 0% balance transfer of £500 from my other credit card.

I've just seen the MSE warning:

There's a devious trick some cards play if you have a 0% for purchases deal. Often they also allow you to shift debts to the card, but this can be at a higher interest rate. If it is, when you make repayments lenders bias them towards paying off the cheap debts first.
This means more expensive debts from balance transfers sit on the card locked in, speedily accruing interest but you can't start paying them off until the entire cheap purchases debts are repaid.

I don't quite understand it though -- am I going to have a problem on my 0% purchases because of my 0% balance transfer?

*confused*

kriss_boy

Its not advisable to only pay minimum payments aregardless of it being during a period of 0% as the reality is the credit card companies offer these rates purely on the chance you will have debt on the card when the offer does end.

The 0% on transfers will probably carry a 3% which is fairly inexpensive in this instance.

If I were you and the purchases are essential Id make sure I pay as much per month as possible to aim to clear the debt substaintially before the 0% period ends.

CannyJock

From their card page:

Pay 0% interest on ALL purchases for 12 months from account opening
Pay 0% on balance transfers for 6 months from account opening (2% fee on all balances transferred in the first 4 months)

Basically means after 6 months you'll be paying interest on the £ 500 balance transfer.

You should call their customer services and check whether the minimum payments will be allocated against the longest 0% promotion (your purchases) or the shortest 0% promotion (your balance transfer). Also from their website:

See section 2(D)(b) in your Credit Card Agreement for full details.

CannyJock

kriss_boy wrote: »

Its not advisable to only pay minimum payments aregardless of it being during a period of 0%

Financially, the best thing you can do during a 0% promotion is pay the minimum. You take the rest of the money you would normally have paid and put this into a high interest savings accounts. This way you can make money.

kriss_boy wrote: »

The 0% on transfers will probably carry a 3% which is fairly inexpensive in this instance.

Yup, 2% fee for transfers and there's no fee with the purchases, so you can make a profit from 6% instant access accounts.

kriss_boy wrote: »

If I were you and the purchases are essential Id make sure I pay as much per month as possible to aim to clear the debt substaintially before the 0% period ends.

I'd pay the minimum, put the rest in a savings account and then clear the whole amount from the savings account before the 0% promotion runs out

kriss_boy

It depends if you can trust yourself to not spend the money though.

I wanted to put money away in a saxings account instead of overpaying the mortgage... but my girlfriend pointed out its better out of arms reach!!

CannyJock

kriss_boy wrote: »

It depends if you can trust yourself to not spend the money though.

I wanted to put money away in a saxings account instead of overpaying the mortgage... but my girlfriend pointed out its better out of arms reach!!

True, but that's no different from going on a spending spree with the available credit and spending more than you can afford to repay. A bit of financial responsibility and discipline is one of the ways to make your money (and the banks) work for you and boost your personal wealth.

The more you deal with these financial products the more comfortable and confident you become with them.

All you have to do is keep the savings account out of reach (EDIT: So long as the after tax AER on the savings beats the APR on the mortgage!)

eskaiem

Ahh starting to make some sense.... I should have kept the two seperate really, but never mind.

CannyJock wrote: »

Basically means after 6 months you'll be paying interest on the £ 500 balance transfer..

Thanks - this makes sense - happy with 6 months by which I plan to have cleared the balance transfer bit of it anyway.

CannyJock wrote: »

You should call their customer services and check whether the minimum payments will be allocated against the longest 0% promotion (your purchases) or the shortest 0% promotion (your balance transfer).

Good advise - I'll do this as well

Thanks everyone

Moggles_2

CannyJock wrote: »

You should call their customer services and check whether the minimum payments will be allocated against the longest 0% promotion (your purchases) or the shortest 0% promotion (your balance transfer).

This is important. If the former, your £500 BT would still be sitting on your account in
6 months time and you would have to clear all your retail transactions to avoid interest.

If you ring Tesco Finance on 0800 505 555, you'll avoid the perishing 0870/0845
numbers

Let us know how you get on

Very best
M

kriss_boy

CannyJock wrote: »

True, but that's no different from going on a spending spree with the available credit and spending more than you can afford to repay. A bit of financial responsibility and discipline is one of the ways to make your money (and the banks) work for you and boost your personal wealth.

Yip youre speaking my language and but the look on my girlfriends mums face when I said about us saving the cash instead of overpaying the mortgage!!

Deary me!!!

We can afford to do both and Im hoping in 2 or 3 years time I can have enough cash for a deposit on a flat as an investment with enough cash in the back to cover the mortgage incase it lies empty.

CannyJock

kriss_boy wrote: »

Yip youre speaking my language and but the look on my girlfriends mums face when I said about us saving the cash instead of overpaying the mortgage!!

It all comes down to APR and AER at the end of the day. Unless your girlfriend's mum is a financial advisor with a plan better than yours, I'd stick to your guns.