MSE News: Credit card payment trap ends

Former_MSE_Guy

This is the discussion thread for the following MSE News Story:

"A major credit card shake-up will be complete this month with all providers set to stop penalising those who spent on their plastic after making a balance transfer ..."

Read the full story:
Credit card payment trap ends

stphnstevey

Does this mean that we won't have to bother with a seperate cards for BT and for spending now?

If you have a 0% BT and get charged interest on spending, I guess you still will need to ensure that the spending amount is paid off by the end of the month or incur charges (eg £3000 BT and spend £150 in a month, they will only be able to set DD up for minimum payment or full oustanding balance £3150).

Consumerist

stphnstevey wrote: »

Does this mean that we won't have to bother with a seperate cards for BT and for spending now?

If you have a 0% BT and get charged interest on spending, I guess you still will need to ensure that the spending amount is paid off by the end of the month or incur charges (eg £3000 BT and spend £150 in a month, they will only be able to set DD up for minimum payment or full oustanding balance £3150).

Unless you also have 0% on your purchases then you will still be charged interest on your spending unless you pay off your ENTIRE BALANCE (i.e. including the BT). If you want to avoid interest charges completely, you will still need two cards, I think.

You should check your Ts & Cs to be sure about this but it could be a booby trap for the unwary.

izools

This is correct.

If a card has said #3150 balance comprising #3000 promotional offer and #150 spending repaying #150 + minimum will still incur interest charges between the date on which the purchases were made and the date on which payment was received - as the entire balance isn't being cleared each month.

If the goal is to have a 0% balance transfer plus some way to put monthly shop on a credit card which is repaid in full ergo not incurring any interest two cards will still be required.

The difference is that as a result of the new rules, the purchases will not incur interest in the subsequent month as they will have been paid off.

Prior to the new rules, the purchases will not have been paid off and will incur interest until such a point the whole promotional rate balance has been cleared.

Consumerist

izools wrote: »

The difference is that as a result of the new rules, the purchases will not incur interest in the subsequent month as they will have been paid off.

If you don't also have a 0%-on-purchases deal on the card then, as far as I know, the interest charged in any statement will only cover the period up to the statement date. If this is the case then there will be an additional interest charge on the following statement to cover the period up to the date of the repayment.

stphnstevey

Sorry that doesn't seem right

The scenario below, if you pay off the £150 which was spending, as long as this is at least the minimum payment or more, then the rate of interest on the remaining ~£3000 would surely be the promotional 0% BT rate?

squack

yes the £3000 is still being charged at the 0% rate, you are just paying the interest relating to the £150

philzi

In an attempt to understand how long I'll be paying off a credit card under the new rules, I rang them to ask under what basis the total balance was accruing interest, eg:

£xxx.xx at 0%
£xxx.xx at 22%
£xxx.xx at 25 %

And the answer was............they couldn't tell me as "it's all worked out automatically and we don't have the information available to work it out long hand.."

Looks like the only way I can do this is by SAR request (which needs doing anyhow)

phil

Consumerist

A bank must give you this information if you request it. If they refuse, you should put the request in a formal written complaint.

Edit
Just to clarify, the bank is not required to do the calculation for you but they are required to give all the information necessary for you to calculate it for yourself; this will include the amounts in each category of interest charged.

Sassyone

I am not sure if this has already been covered on here or not, but I thought I would let you know what happened to me when I used a card that had a balance transfer on it that I am paying off. I thought it would be ok to make a small purchase with it now that they have changed the way that payments are allocated, I assumed there would be no interest charged for this month and I knew it would get paid off when I paid the next installment on the BT when the statement arrived.
I bought something for £4.68 on 30/11/10 and by the time my statement arrived dated 16/12/10 I had already been charged £1 in interest on it. When I queried it I was told that interest is charged from the day of purchase when there is a balance outstanding.
I know this was probably put in the small print when the changes were made but I was caught out. At least we know how the card companies are getting their money to make up for losing the interest from the other method of allocating payments.
As far as I am concerned this means you still can't use a credit card that you have transfered a balance to until it is paid off.

Enigma80

Right I'm a little confused and I think I've probably messed up, but here's what I've done:

CC1: balance £3000
CC2: balance £2000

I've been approved for CC3 (16months 0%) and during application I asked for balance transfer of £2000 from CC2.

CC2 offered 17 months 0% on BT, so I did a BT from CC1 to CC2 which has gone through now.

I thought that I would be left with two CC's both with 0% interest for 16months. I'm now under the impression that CC2 won't neccasarily transfer £2000 outstanding balance to CC3? It will just transfer £2000 from the total outstanding amount? I applied for CC3 about a week before BT from CC1 to CC2.

So basically I'm going to end up paying interest on CC2?

Have I made a big mistake?