Possibly stupid credit cad question...

MiserlyMartin

Sorry if this is an obvious question but:

I have a Santander zero card with money owing on 12 months 0%.
It also has 3 months 0% on purchases.

How can one pay off the purchases made after the 3 months is up, whilst still not paying off the balance transfer part on 12 months 0%. Do they bill that part separately?

Cheers for any help

iamana1ias

You can't. You can never ever use a card like that for both balance transfers and purchases. It's the absolute golden rule.

Fruit_and_Nut_Case

iamana1ias wrote: »

You can't. You can never ever use a card like that for both balance transfers and purchases. It's the absolute golden rule.

Good advice. You would almost think that the card issuers are trying to trap the unwary.

byebyedebt

Thats the trick that catches people out.

From their summary box on their website. Payments are allocated as follows

interest;
payment protection premiums;
fees added to your Account , other than those set out below;
fees payable under clause 6.2 on Balance Transfers, Cash Transactions, Credit Card Cheques and Transactions in a foreign currency;
Balance Transfers;
Purchases ;
payments by Credit Card Cheque ;
Cash Transactions.

So you spend £2000 on purchases and £2000 on a balance transfer. Once the interest free period is up you start paying interest on the purchases at 18.9%. From that point your payments are allocated to the interest and then to reducing the amount on the balance transfer. The trouble is that, that means you are paying off the balance that you aren't paying interest on. But the purchases are being charged at 18.9. So the following month your payments are allocated to the interest and then the 0% balance. As you still haven't paid that off you end up getting charged interest on the purchases again. It goes on, and on, until the entire balance is paid off. This is called a negative payment hieracy as the cheapest debt is paid off before the expensive making them more money.

Fortunatly the credit companies are being cracked down upon. From Jan 2011 they will have to allocate payments to the expensive debt first. This will get around the problem, however expect those life time of balance transfers where the headline rate is lower than the existing purchases rate to disappear.

Some companies, including MBNA are introducing positive payments sooner.

noah271007

I currently got a Tesco CC with £4K CL taken out in Feb of this year.

Balance transfer to this card was £1,250.

I have made purchases on this card (which yes a bad mistake). Current balance is now £2,400.

However the purchases 0% is for 12 months and balance transfer 0% for 6 months. Balance transfer 0% promotional rate is due to expire next month.

So long i have paid off the balance transfer amount that was transferred, then i will not face any incurring interest on the card?

I believe balance transfers are paid first before purchases in order? Or have i done something wrong here?

byebyedebt

Tesco Payment Hieracy is as follows

1. Interest on special offers (excluding 'Tesco Buy Now Pay Later')
2. Other interest, any fee and charges
3. Special Offers
4. Balance Transfers, Purchases and Promotional Cheques
5. Cash Advances and Money Transfers
6. 'Tesco Buy Now Pay Later' special offers shown on any statement

So in theory your payments will pay off the balance transfers first as long as the balance transfer is paid off by then, you shouldn't pay any interest.

noah271007

byebyedebt wrote: »

Tesco Payment Hieracy is as follows

1. Interest on special offers (excluding 'Tesco Buy Now Pay Later')
2. Other interest, any fee and charges
3. Special Offers
4. Balance Transfers, Purchases and Promotional Cheques
5. Cash Advances and Money Transfers
6. 'Tesco Buy Now Pay Later' special offers shown on any statement

So in theory your payments will pay off the balance transfers first as long as the balance transfer is paid off by then, you shouldn't pay any interest.

I thought as much. Much appreicated for the post byebyedebt:D

MiserlyMartin

Thanks for the replies. I now see what I did wrong. Normally I am not fooled. Thats one to learn from, By the way its a Santander card. Their customer services is at best terrible - at worst terribly frustrating. (very long story) They will not let you pay off an amount greater than £2000 over the phone. What kind of company is this. I am switching to the new Halifax card - I never want to deal with this awful bank again!

Curt.

byebyedebt wrote: »

Fortunatly the credit companies are being cracked down upon. From Jan 2011 they will have to allocate payments to the expensive debt first. This will get around the problem, however expect those life time of balance transfers where the headline rate is lower than the existing purchases rate to disappear.

Not at all, these sorts of over regulatory schemes and generally nannying or intrusion from the government has generally always meant one thing: cost being trickled down to the consumer. CC companies are easily capable of findng ways to get round this and have already started with things like dormancy fees, lower rates of 0% promo offers, larger BT fees and so on.

In fact in the US as this was being proposed some of the BT offers disappeared altogether, it started to become available for only those who had existing current accounts and a lot went the way of Lloyds and started introducing minimum spend criteria for BT's and it ultimately meant that those who could afford to spend more were approved and everyone else was basically left without many options. Its beginning to pick up as the Senate fillibustered some and then gutted out the worst of so the CC companies know their fear mongering (though really its just lobbying to protect their interests) paid off and now there will some watered down crap so Obama can look like he is doing something to overhaul lending practices..

Even as credit starts to free up again, never doubt the ability of the government to come in and truly screw it up for everyone with over regulation....

Curt.

MiserlyMartin wrote: »

Thanks for the replies. I now see what I did wrong. Normally I am not fooled. Thats one to learn from, By the way its a Santander card. Their customer services is at best terrible - at worst terribly frustrating. (very long story) They will not let you pay off an amount greater than £2000 over the phone. What kind of company is this. I am switching to the new Halifax card - I never want to deal with this awful bank again!

Yeah the call centers in India dont help though they do have the only available no fee BT offer in the UK - the gimmick helps potential customers get drawn in...

Worst comes to worst just get another BT (to halifax) who usually dont have terrible customer services...

MiserlyMartin

Actually a lot of the staff I have spoken to are in England who also appear to be just as clueless as the branch staff.

The best revenge is to do what MSE Martin says - screw them back by taking their top paying deals then getting the hell out. And boy, don't I want to get the hell out of Santander!!!