Interest on interest-free balance transfers?!

Mosh

Watch out for this one...

I took out an Amazon credit card via MBNA some months ago. They offered an interest-free balance transfer (subject to the usual small fee) which I made use of. In addition, they run a points system which builds up towards Amazon vouchers based on the amount you spend.

All fine and hunky-dory.

However, I noticed that I was being charged a small amount of interest each month despite paying off all purchases I made on the card as soon as I made them. Three pounds one month, £1.23 the next... that kind of thing.

I rang and the chap on the phone apologised, said he couldn't work out why this was happening and refunded the money.

Over the next three months, it continued so I rang again. Once more, I checked my purchase/payment procedure with them, clarified the position as regards the outstanding transferred balance, the chap apologised, refunded and all was fine.

Surprise. Three months on and I had another three charges on there - £1.00, £1.21 and £1.00. I've just called them *again* to sort it, but this time I've been informed differently.

Because I'm making purchases, I have to clear the *entire balance* each month - not just the purchases - otherwise I incur interest. This seems to be the case even if I buy something then immediately go online and make a debit card payment onto the card before it's appeared on any statement.

However, if I don't use the card - which is where MBNA make their money! - then I don't incur interest. This doesn't make sense to me, as it's using the card for purchases which nets the issuer a fee from the retailer. With the current scheme they're encouraging me *not* to use the thing!

In addition, the card promises "up to 50-ish" (sorry, can't recall the actual amount) of days interest-free on purchases. This obviously isn't the case as I'm being charged interest on purchases which I'm paying off - at the most - a couple of days after I make them.

Obviously, the solution is to pay off the entire transferred balance first and then start using the card as normal but that's just not how it was sold to me, nor explained by the first two people on the phone.

At least I know where the charges have been coming from at last, and they have all been refunded to date - though I'm aware there will be *another* pound on next month's that I'll have to ring up and contest.

So keep your eyes open, folks, and check those statements!

fozmcfc

As you now know, as you are not clearing the balance off completely, not just the purchases, but the whole balance, you get charged interest.

We have had several threads about this in the past about various cards.

It is still a reason why you should not put anything onto a balance transfer card, unless the purchases have the same 0% period.

Still doesn't hurt to get another warning out there.

mjm3346

Have you paid off the fee for the transfer which unlike the transfer will probably attract interest?

Mosh

Yup, I agree. What gets me is the lack of clarity when I got the card and the fact that it took three phone calls before a member of their own staff could tell me where the charges were coming from!

The first two times I asked directly if it was to do with the balance transfer and was told - on both occasions - that this was "separate" and that payments I made took care of interest-bearing transactions first (i.e. purchases) as per current banking practices.

I just find it amusing, in a way, that by charging interest if you make a purchase they're encouraging you not to use the card - which is the only source of revenue on it to them if you're otherwise using it just to "store" an unpaid balance interest-free.

*shrug* Ah well, only three calls and 9 months to get the facts out of them...

Mosh

mjm3346 wrote: »

Have you paid off the fee for the transfer which unlike the transfer will probably attract interest?

Definitely will have done. I believe they class that as part of the original balance transfer so it's in with the interest-free sum. However, even if that's not the case I always "overpay" my purchase payments so that I'm chipping away at that sum. I'll have covered that initial fee within the first month or so with those payments.

chattychappy

I'm afraid call centre staff not being able to explain the operation of accounts is not new!

Mosh wrote: »

Definitely will have done. I believe they class that as part of the original balance transfer so it's in with the interest-free sum.

Cards seem to vary in this. My experience of MBNA is, as you say, that the fee is treated as part of the BT balance.

Mosh

chattychappy wrote: »

I'm afraid call centre staff not being able to explain the operation of accounts is not new!

You are not wrong! I've had this with several companies - not just credit card ones - in the past!