Avoiding interest payments

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mattlangfield
mattlangfield Posts: 10 Forumite
edited 9 January 2011 at 10:08PM in Credit cards
Hi all - quick question from a newbie!

I have a credit card which has various confusing 0% promotions which have been nice to exploit! I want to check when I should move to another credit card to avoid paying massive interest rates.

I made a single purchase of £5,000 in November taking advantage of 0% on purchases until June 2011 for purchases over £250.01.

I then made various small purchases totalling about £700 taking advantage of 0% on purchases until March 2011 for purchases up to £250.00.

The question is as of March 2011 will I be paying interest on the full £5700? If so I will move to another credit card (barclaycard) soonish and balance transfer the lot.

Many thanks in advance! :beer:

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  • mattlangfield
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    can anyone help?
  • izools
    izools Posts: 7,513 Forumite
    Combo Breaker First Post
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    As of march interest will begin to accrue on the small purchases totalling ~#700, not the full #5,700.

    Your repayments, as per the new regulations, will only be allocated to the balance incurring the most interest - so the #700.

    If you pay off #700+ from the card after you start to be charged interest on that balance you will then have the interest free #5,000 left until June.

    This is due to a recent change in law which, as of today, forces all credit card companies to allocate your payments to the most expensive debt first.

    Hope this helps :o
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  • papalimabravo
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    Hi,

    Difficult one.

    Are these the only transactions you have made?

    The balance made up of the £5k purchase probably sits in it's own 'payment plan' which goes to the normal interest rate in June. The balance made up of the £700 of purchases probably sits in a different 'payment plan' which goes to the normal rate in March.

    Presumably you are making payments. So assuming no further purchases, the balance come March and June will be a bit less.

    On the face of it, if the £5k purchase qualified for the offer expiring in June, then you will probably get this interest free until then.

    All depends on how they allocate payments though. You might find some quirk which pays down balances with the same rate (i.e. 0%) depending on the order on which they were opened. So say you make a £500 payment to pay down the remaining balance of the promo ending in March before it goes interest bearing - you might find this pays off the remainder of the £5k balance, leaving the remainder of the £700 balance to roll over to interest bearing!

    Lots of 'probablys' there. I wouldn't be afraid to call your issuer and ask. I wouldn't be surprised if regulations dictate that they have to be able to provide you with this information. (Someone else may know.)

    Good luck.
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