Sneaky Credit Card companies

velrist

I transferred my brother's credit card balance over to Virgin on 0% until April 2011 and now their introductory rate is over they've offered a new promotion of 0.9% until October 2010.

At very first glance I thought that was alright until I remembered that they pay off the lowest interest rate first, so between October 2010 and April 2011 they will be charging the 0.9% balances at their standard rate of 16.9% which won't have gone down at all due their policy of paying off lowest interest rates first.

Just something to bear in mind in case anyone else gets caught out thinking it's a better deal than it really is.

Mozette

I don't quite understand what you are saying here about charging the 0.9% balance at 16.9%?
Did you have an existing balance after the 0% ended, which would now be on the standard rate? I don't see how anything transferred on the 0.9% promotion would be charged at the standard rate until the promotional rate ended.

euronorris

The 0.9% offer only lasts until October 2010. Therefore, after this, it will be charged interest at rate of 16.9%. And this balance won't decrease as the original 0% balance will be paid first (which lasts until April 2011).

velrist

No what I mean is they are currently offering a new deal of 0.9% on future balance transfers until October 2010, but because of the way they pay off your balances the payments would come off my original 0% balance first (which runs out in April 2011).

So if I did another balance transfer of say £500 at the 0.9% rate now and hadn't cleared my original 0% balance transfer off in full by October then the £500 would be untouched and from October 2010 would be charged at their standard rate whilst my payments would be made against my 0% balance until it runs out in April 2010 (when I would hopefully move it to another 0% offer).

It's just something to be aware of as it could negate the benefit of your first balance transfer by locking in any subsequent balance transfer into the standard rate if that promotional rate expires first but as it is at a higher interest rate the balance won't be touched.

Sorry if it's not clear. To my mind, if I had taken up the 0.9% rate I could effectively be reducing the length of my interest free period by six months from April 2011 to October 2010 depending on how close I am to clearing the balance in full by October rather than the following April.

IWantToBeFree_2

I don't think its sneaky, it is simply standard practice for most credit card companies and is detailed in full in their terms and conditions. People do often get caught out by this, but it is their fault, and not the fault of the lender.

euronorris

I think the reference to it being 'sneaky' is because it is purposely designed to catch people out.

People might accept this, fully planning to pay off the current balance before October, but then their circumstances change and they are unable to pay it off that quickly.

Come November, they start to be hit with the extra interest.

Therefore, they are better off not accepting such a deal. And the credit card companies know this. So the 'Hey, look at out fabulous offer' is not so fabulous after all.

IWantToBeFree_2

It would be sneaky if they hid it, but the terms and conditions are there for all to see....