Barclaycard: 0% BT + spending = interest!

flangi

So... silly me thought that when credit cards moved to setting payments to cards against higher rates of interest first, that meant that it was finally feasible to have a 0% BT and a regular fully-monthly-repaid 'spending' balance on the same card, with no interest charges. I recently moved to this arrangement on my Barclaycard.

In retrospect the problem is obvious, but IMO not clear and something that the rate-ordering law should have also adjusted. Barclaycard (and some/many others?) charges no interest if the full balance is paid off from the previous month. In this situation, since the whole point is that it would be pointless for the *0%* amount to be paid off, then the magic "cleared previous balance -> no interest" rule doesn't apply, and (some) interest is charged on the regular balance *even if the full non-0% amount is paid off*. Hence while cards with balances at multiple rates do incur lower interest with the recent change to which balances are paid off first

Perhaps it was naive to think that the order of paying off balances at different rates meant that the old rule, about keeping credit cards only for one of spending or transferring at a time, was not necessary. That said, I'd be interested to hear what people think about this - anyone else been caught? Is this 'unfair' finance that should be campaigned against? Do other cards not do this? Wouldn't it make it clearer to consumers, if card rules applied to balances at each rate separately, so that in this case if the regular balance was cleared then it did not affect the 0% balance?

PS. While personally I've been stung for a small amount of interest, I'm "ok" with accepting it as a lesson, and luckily I'm able to pay off the account and return the card back to being spending only. I expect others could easily be stuck with this situation though... and that the amounts involved could be a lot higher...

CLAPTON

sorry to say this but 'clearer' or 'fairness' simply do not come into this

banks are not your friend

they are there to make money

for years and years and years they have 'cheated ' with all sort of scams

why did you believe they have suddenly changed

surely you didn't think they offered you 0% because you are a good, worthwhile, decent sort of chap?

they do it because lots of people muck up and then they make money

they only change their rules when absolutely forced to after years of fighting

if in the end they are forced to obey all the 'fair' and 'decen' and 'clear' rules they will simply stop offering 0% BT deals ; so be careful what you wish for

chattychappy

I think it is clear enough, though you are not the first person to get caught.

CCs publish "purchase" rates. They also say you get up to 56 days interest free if the balance is paid in full. So unless you clear the balance in full, you will pay the purchase rate on purchases. People have come to rely on the 56 days interest free thing. But it is just a concession - and one that is subject to a clear condition.

I think the rules should be made clear (and be fair). But I also think it's fair to leave it to the cardholder to determine how application of those rules will impact their usage.

flangi

CLAPTON: I'm fully aware that banks are out to make money, and don't really expect them to be 'nice', but the way in which the multi-balance/rate change was highlighted/hyped seemed to make it seem like some amazing magical cure-all It is true that they (and many other businesses) make money when people forget to make changes to finances at the appropriate times - but at least to me there is a difference between keeping you around and hoping the 0% "matures" to their standard rate, and something like this where it is actually not possible to BT and spend. While the sums involved are probably not quite as large as with mortgages, I do feel that simplification/clarity as has been at least attempted in the latter would be a good thing. I am not suggesting that banks be forced to 'safely' move your balance when it expires at 0%, more that simplistic/obvious/clear behaviour be aimed for, in principle...

chattychappy: It is clear as it stands, in so far as reading T&Cs/licenses/EULAs and similar legal docs ever are. My beef is more that rather than relying on MSE and similar to "know" that cards shouldn't be used for spending and BT at the same time (as just one example), the cards should warn about these situations, if nothing else. Perhaps this is just a case for teaching finances at school I suppose that people may not be able to get multiple cards when they want, but one of my original thoughts was that balances at different rates (cash/purchase/BT) be treated as different pots entirely (until perhaps be forced to 'merge' when promotional rates turn off), even be paid off as people wish, individually - essentially like multiple CCs from the same bank, but with one limit? Not sure exactly how it'd exist, and no doubt I'm being idealistic about it.

To summarise, I guess I'd prefer to aim for the "Principle of least astonishment" (see wikipedia; apparently I can't paste links yet)... but applied to financial products

CLAPTON

flangi wrote: »

CLAPTON: I'm fully aware that banks are out to make money, and don't really expect them to be 'nice', but the way in which the multi-balance/rate change was highlighted/hyped seemed to make it seem like some amazing magical cure-all It is true that they (and many other businesses) make money when people forget to make changes to finances at the appropriate times - but at least to me there is a difference between keeping you around and hoping the 0% "matures" to their standard rate, and something like this where it is actually not possible to BT and spend. While the sums involved are probably not quite as large as with mortgages, I do feel that simplification/clarity as has been at least attempted in the latter would be a good thing. I am not suggesting that banks be forced to 'safely' move your balance when it expires at 0%, more that simplistic/obvious/clear behaviour be aimed for, in principle...

chattychappy: It is clear as it stands, in so far as reading T&Cs/licenses/EULAs and similar legal docs ever are. My beef is more that rather than relying on MSE and similar to "know" that cards shouldn't be used for spending and BT at the same time (as just one example), the cards should warn about these situations, if nothing else. Perhaps this is just a case for teaching finances at school I suppose that people may not be able to get multiple cards when they want, but one of my original thoughts was that balances at different rates (cash/purchase/BT) be treated as different pots entirely (until perhaps be forced to 'merge' when promotional rates turn off), even be paid off as people wish, individually - essentially like multiple CCs from the same bank, but with one limit? Not sure exactly how it'd exist, and no doubt I'm being idealistic about it.

To summarise, I guess I'd prefer to aim for the "Principle of least astonishment" (see wikipedia; apparently I can't paste links yet)... but applied to financial products

reread my post

if you got your wishes them there would be NO 0% deals
is that your objective?

people complained about OD charges / fees etc.
MSE, Which, newspapers all agreed and campaigned for the regulators and courts to change the rules; they 'won'

now tha average OD costs are of course higher than previously and often far far more difficult to understand

as I said, be careful for what you wish for

chattychappy

It maybe that one day a credit card would come up with the different "pools" of credit as you suggest. No doubt people would still get confused!

I don't agree that cards should "warn" about situations such as this. I think it is the function of forums like this and a pencil and back of an envelope to work out the scenarios.

As it is, CCs are restricted as to what the rules are (positive payment hierarchy etc) as well as disclosure (silly messages about paying off more than the minimum).

I really think it is going to far to expect credit cards to give "consumer advice" about how to play the system to your advantage (and their disadvantage). Also, it would just invite more complaints of "miss-selling" as people generally take less responsibility for what they agree to and still get into a fix.

In the end, you were hardly ripped off. You simply paid purchase interest at the published rate on purchases you made. You just missed out on the interest free offer.

I tend to agree with CLAPTON - nasty as it sounds, some of these deals only exist because people mix balances, run over the expiry of offers etc. If they can't make the money, they simply won't be in the business at all.

flangi

CLAPTON: I accept that 0% deals have changed in recent years, but I'm not aware of a direct correlation between the change in legislation/regulation and a reduction in the 'quality' of 0% deals available to consumers - these deals seemed to be getting worse well before this point, and there is the whole economy issue and collapse of banks to factor in. That said, if you know of a conclusive relationship between the two, I wouldn't hesitate to learn about it. Similarly, without knowing exactly where CCs/banks make their money, I don't agree that any of the changes would necessarily lead to the 'death' of 0% offers.

chattychappy: I'm not keen on making CC text more complex/detailed/wordy, it is just that my experience has made me desire these products to be less surprising/complex. While I agree that banks/CCs are there to make money, building specific 'traps' into products just seems wrong IMO. People need to take responsibility for borrowing, but that is different to falling into these traps. For me personally it has had little direct consequence. However, it has prompted me to think how badly designed they are, not just in the sense of this one trap, but more generally.

At some level it seems that both of you are arguing that deals should be as complicated as possible, so that the most number of people get 'tricked'; then the banks make the most money, and so they can afford to make "good deals" for the minority who do understand the products. Take this to extremes and I think of the minority of bankers who made money to the detriment of the rest, with all the derivatives and so on. MSE and similar sites level the playing field, both in explaining the principles of borrowing (and taking responsibility for it) and in helping to avoid these traps, but they feel like a sticking-plaster over the problem, and one that not everyone has access to. How best to resolve this isn't obvious, ie. whether regulation is the best way, or whether one bank offering a 'transparent' product would persuade others to follow, but I would be in favour of a change to the current situation.

JasX

flangi wrote: »

I'd be interested to hear what people think about this

My thinking is its something thats never going to be clear cut and based on what we've come to expect from CC terms and conditions a reasonable person should/would carefully check the small print befoore relying on any assumptions.