Allocation of payments warning for Balance Transfers

chris-j

OH recently transferred balance to Santander Zero card and was on holiday just after the transfer and spent around £750. Thinking I was being smart, when I got home I paid this thinking payment allocation goes to most expensive debt first so would avoid interest on this and just have the 0% running as only use this card for overseas spending.
BIG mistake as the allocation of payments on this card (and others as far as I can tell) is the most expensive debt goes first BUT it must be STATEMENTED transactions.
Because I paid this before the statement was issued, despite the payment being made after the card company knew about the transactions, the £750 payments went against the balance transfer rather then the new transactions. Result is 3% of the BT fee I paid was easy money for Santander :mad: and unless I pay off this £750 now I will also get charged interest for the next £750 of payments. Fortunately the exchange rate and no overseas fees balances this off a bit for me but still annoyed and thought it worth mentioning.

Impact of this though goes beyond having transactions just after a BT is done since if I spent £200 tomorrow on this card then my next payment will go against the BT transaction and the following one will start going towards interest bearing transaction.

Worth MSE updating the guide to cover this as I check BoS terms and they also refer to transactions which appear on your statement. So while things have improved significantly, they will still capture some interest from you if you spend anything on a card with a BT on it.

BoGoF

I still stick to the 'old' way of doing things - never spend on a card you have done a BT on, avoids these sort of things.

fozmcfc

Agreed with BoGof, seperate cards, avoids any confusion and problems occuring.

TBH I don't understand the problem, you get a statement you make a payment towards that statement and it goes towards the balance on that statement, I think that is perfectly acceptable and indeed understandable.

When the next statement is issued, the purchases will be on them, you pay it off ASAP after the statement date to recieve little or no interest as the money goes towards the purchases.

Afterall the purchases will not be accruing any interest until the statement is issued with them on.

chris-j

I agree with BoGoF as well, what I was pointing out was that on the MSE guide it does make mention of the fact that using a BT card can be done with less impact than before, all I was pointing out was that if you do use it, wait till the transaction appears on your statement before paying it off otherwise you will pay extra interest and get less beenfit of the BT. Ideal solution is always not to use BT card for anything else

fozmcfc

I guess peoples minds work different ways, but I can't understand someone thinking that payments would go towards something which they haven't yet been asked/billed for.

In effect you actually had time to pay for the purchases and still have your payment allocated towards them, so it is to your advantage.

On a seperate point, if someone does use their card for BT and purchases and they pay off the purchases in full, because the whole balance (i.e BT and purchases) isn't paid off, some interest is charged the next month, because to get 0% on purchases you need to pay off the whole balance on the previous months statement.

chattychappy

I have commented on this many times before as I use Zero for cash withdrawals overseas, but the reminder is very helpful.

You should wait for the statement before paying off your cash withdrawal, or in this case purchases made outside of the BT deal.

I don't agree with a general "don't mix rule". You have to do the maths for your particular situation.

In general, if you are paying interest elsewhere and have a BT deal then you SHOULD put purchases onto your BT card. Ie mixing can save your overall interest bill. The reason is that that way more of your monthly payment will go towards your purchase balance and less against your BT deal.

guesswho2000

fozmcfc wrote: »

On a seperate point, if someone does use their card for BT and purchases and they pay off the purchases in full, because the whole balance (i.e BT and purchases) isn't paid off, some interest is charged the next month, because to get 0% on purchases you need to pay off the whole balance on the previous months statement.

In general I'd agree with keeping BT & purchases separate, when positive order of payments was introduced I was wary of the above point, interest accruing and there being no interest free period as the balance wasn't cleared in full.

However, I have a 6.9% LOB on my Barclaycard, prior to this I had accrued freedom reward money, which I spent at pizza express, obviously necessitating the use of the BC for payment; the payment made the following month cleared this with no interest charged, confirmed by the statement stating the interest rate of 0.561% was charged on the full outstanding balance.

EDIT: I should point out there was an actual purchase at Pizzaexpress, I didn't pay the whole bill using freedom money, therefore something was actually charged to the account