When 0% isn't 0% - yorkshire mastercard

King_Weasel

Yorkshire Bank have an attractive offer with their MasterCard. Or so I thought.

0% BT for 16 months for a 3% fee sounded good. I was pleased to get a good credit limit and find out I could transfer direct from a bank as well.

But there's a nasty catch I luckily discovered just in time: the 0% only applies to the transfer, not to the fee. That gets charged at 16.9% after 3 months, and of course it's the BT that gets paid off first, so the interest charge clocks up nicely.

Be warned, stoozers!

Paul_Herring

King_Weasel wrote: »

the 0% only applies to the transfer, not to the fee. That gets charged at 16.9% after 3 months, and of course it's the BT that gets paid off first, so the interest charge clocks up nicely.

Be warned, stoozers!

Most cards do this (both charge interest on the BT fee, and have the payment hierarchy pay off the cheapest debt first.)

Egg used to reverse the payment hierarchy for the fee only, resulting in it being paid off IIRC, but don't know if they do these days.

CannyJock

From their summary box:

http://www.ybonline.co.uk/personal/credit-cards/gold-mastercard/gold-mastercard-personal-credit-cards

If you do not pay off your balance in full we will apply payments you make to your account firstly to pay off interest, any fees or charges and insurance premiums. We will then pay off other transactions in date order, paying off the oldest first, but where they have been outstanding for the same length of time, we will pay these off in the following sequence –
1) Balance Transfers
2) Credit Card Cheques
3) Purchases
4) Cash Advances

• The minimum payment is an amount equal to or at least 2.5% of the outstanding statement balance

Doesn't this simply mean that your minimum payments will be allocated against the 3% BT fee first, so it will be cleared by month 2?

King_Weasel

Paul_Herring wrote: »

Most cards do this (both charge interest on the BT fee, and have the payment hierarchy pay off the cheapest debt first.)

Egg used to reverse the payment hierarchy for the fee only, resulting in it being paid off IIRC, but don't know if they do these days.

I've never encountered a card before with a 0% bt offer that charged interest on the fee. And I've encountered a few in my time.

CannyJock

King_Weasel wrote: »

I've never encountered a card before with a 0% bt offer that charged interest on the fee. And I've encountered a few in my time.

LTSB are the one that I always think of whenever this gets mentioned:

http://www.lloydstsb.com/credit_cards/platinum_card.asp "3% fee applies and interest is charged on this fee."

Think I had an MBNA card that had this too - but the interest was at the purchase rate which was 0% for the first 3 months, and payments were allocated against the 0% offer that ended first so it was paid by the first couple of minimum repayments.

YorkshireBoy

King_Weasel wrote: »

I was pleased to...find out I could transfer direct from a bank as well.

I've had a YB Gold card for over 20 years now and occasionally get (unworkable) BT offers from them...including money transfers at 5.9% APR.

Are you saying that SBTs are possible at 0% on this card now? Do you have a link to anything stating as such?...or is it just buried in the paperwork sent with the card?

King_Weasel

YorkshireBoy wrote: »

I've had a YB Gold card for over 20 years now and occasionally get (unworkable) BT offers from them...including money transfers at 5.9% APR.

Are you saying that SBTs are possible at 0% on this card now? Do you have a link to anything stating as such?...or is it just buried in the paperwork sent with the card?

Sorry, no link, but it's the Yorkshire Bank Gold Card. The BT offer is headlined, but you only discover the snag I mentioned when you actually ring to arrange the BT. I see no point in taking up their offer unless you can't access a genuinely 0% offer elsewhere.

Presumably you're not eligible anyway because you're not a new customer.

splatt30

I know it's a bit sneeky but the interest will not amount to much. If you're that concerned about the interest on the fee simply pay the fee back immediately. The T&Cs say that payments are first allocated to interest (none) then any fees so the fee will go and no / virtually no interest will be charged. If you've got a good savings rate there is still a good stooze to be made on 16 months 0%.

YorkshireBoy

King_Weasel wrote: »

I see no point in taking up their offer unless you can't access a genuinely 0% offer elsewhere.

But, as CJ has shown in post #3, their allocation of payments policy means the BT fee will have been paid off well within the 3 month introductory period on purchases...meaning it won't attract any interest at all?

At the end of the day though, unless you don't pay tax (or have a particularly bad offset mortgage rate) you're unlikely to make any money on this deal anyway with savings rates as low as they are at the moment...

Stoozing Profit Prediction

Data entered by the user
Balance to be transferred (pounds)...... 10000
BT card interest rate (%) .............. 0
Introductory period (months) ........... 16
Balance Transfer Fee (%) ............... 3
Maximum BT Fee (pounds)................. No Maximum
Min Monthly Payment Type ............... Percentage
Min Monthly Payment Amount (% or pds) .. 2.5
Savings interest rate (AER %) .......... 3
Tax rate ............................... Basic Rate

Your Results
Balance Transfer Fee paid (pounds)...... 300
Stooz pot balance at end of intro ...... 6902.45
Credit card balance at end of intro .... 6869.28
Gross Profit before tax on interest .... 33.17
Tax on interest to be paid ............. 66.63
Your Profit (pounds).................... -33.46

Created using the Stoozing Calculator at www.stoozing.com.
Reproduced on Moneysavingexpert with permission.

YorkshireBoy

splatt30 wrote: »

If you've got a good savings rate there is still a good stooze to be made on 16 months 0%.

According to the calculator on the stoozing website, a basic rate tax payer will need 3.4% AER just to break even!...more if you can't eek out the full 16 months.

Other than LTSB Vantage and A&L Premier Direct current accounts, I'm not sure such "good savings rate" instant access accounts exist at the moment?

King_Weasel

splatt30 wrote: »

I know it's a bit sneeky but the interest will not amount to much. If you're that concerned about the interest on the fee simply pay the fee back immediately. The T&Cs say that payments are first allocated to interest (none) then any fees so the fee will go and no / virtually no interest will be charged. If you've got a good savings rate there is still a good stooze to be made on 16 months 0%.

You're right that the first 3 months are interest-free for purchases as well, but I interpreted what the operator told me as meaning my repayments would go to the BT first, not the fee. So I would still be paying 16.9% on the full fee after the 3 months. I do not have the option of paying off the fee first.

I planned to get 4% gross with the loan (wife pays no tax) on Lloyds TSB Vantage. So there isn't a huge gain with an upfront 3% charge and further interest payments mean it's no longer worthwhile. But this critically depends on whether the operator was right, given what the T&Cs seem to say.