Balance Transfers

jamie85_2

Hi that is unfortunate, I am not an expert in credit cards as I only have the one, but I always thought it was a rule of thumb situation, where when you do a balance transfer you do not put purchases on that card as interest will be added on, as you need to pay the balance that been transferred first in order to pay off the purchases. I believe credit card companies would do this in order to make there money somehow. It is always a good idea to do reach or maybe contact a financial advisor when dealing with debt or finance.

chattychappy

jamie85 wrote: »

Hi that is unfortunate, I am not an expert in credit cards as I only have the one, but I always thought it was a rule of thumb situation, where when you do a balance transfer you do not put purchases on that card as interest will be added on, as you need to pay the balance that been transferred first in order to pay off the purchases. I believe credit card companies would do this in order to make there money somehow.

It used to be a good rule of thumb, but for some time now credit cards have been required to apply payments received to the highest interest balance first. This makes the situation more complicated. In general I would say:

1) if you are NOT paying interest on your purchases (because you clear them each month) and you have a BT card, then DON'T mix.

2) if you DO have a purchase balance on which you are paying "standard" interest AND you have a BT card, then put new purchases on the BT card.

This is a simplification, because it depends on specifics. But the gist is this. By putting purchases on to your BT card, the payment you must make to that card will be applied to your purchases before the low-rate BT. By putting the purchases onto a separate card, your payment to the BT card is "wasted" to the extent it is paying a low interest balance when it could be used to pay a high interest purchase balance.

Or put another way, by putting all your transactions onto the BT, the payment hierarchy will work to make sure you knock down your most expensive debt first. By splitting over different cards, you are stopping this process.

But you have to do the maths for the particular case and it depends on the actual rates concerned.