Understanding 0% Balance Transfers

makes_cents

Hello,

I was delighted that I was accepted recently for a credit card with 0% balance transfer for 23 months with BarclayCard with a £5000 limit.

I transferred my existing credit card debt (about £1500) from Aqua onto my Barclay Card so that it was at 0%.

However, due to relocating and starting a new job I hit my card pretty hard and spent about £1500 again bringing the total amount to £3000.

My question is:

If I paid £1500 off the card am I correct in thinking that I'd be paying off my balance transfer before my purchases?

I'm guessing that the balance transfer is paid off first since that is what costs the bank more money.

Thanks,

MC

SCO

No, Your payments go to pay the debt that is charged the most interest in this case the purchases as the BT is on 0% it will always be paid off last.

As a rule of thumb you should never spend on a balance transfer card.

makes_cents

SCO wrote: »

No, Your payments go to pay the debt that is charged the most interest in this case the purchases as the BT is on 0% it will always be paid off last.

As a rule of thumb you should never spend on a balance transfer card.

Hey thanks for posting.

So am I correct now in thinking that if I pay off my £1500 purchases I can make min payments until the 0% period ends and pay off the balance in full avoiding any interest?

chattychappy

Yes, but you will have interest on those purchases between when you made them and when your £1500 arrives (and a small amount of residual interest to follow).

I wouldn't pay off the purchases until they have appeared on a statement. Some CCs will apply payments to statemented transactions first.

chris-j

Make sure you don't pay the £1500 until the transactions appear on the statement though. Cards normally only apply payments to statemented items. If the spending has not yet appeared and you paid £1500 then it would be applied to the BT.

makes_cents

chris-j wrote: »

Make sure you don't pay the £1500 until the transactions appear on the statement though. Cards normally only apply payments to statemented items. If the spending has not yet appeared and you paid £1500 then it would be applied to the BT.

Thanks.

My online statement said that I've got 60 days interest free purchases and I will start paying interest next month (my purchases were made about 2 months ago now) so I can start paying it off now.

Thanks to everybody for clearing this up.

chattychappy

makes_cents wrote: »

My online statement said that I've got 60 days interest free purchases and I will start paying interest next month (my purchases were made about 2 months ago now) so I can start paying it off now.

Oh, hang on a tick.

Was this some kind of promotional offer you got with the card, not the usual "up to 56(60) days interest free on purchases if you pay your balance in full" thing?

If it's the latter, then you'll still be charged the interest because you wouldn't be paying the balance in full. (You'd only be paying off the purchases.)

BUT, if it's the former, then it seems both your BT and purchases are on the same rate of 0%. Different cards operate different rules as to how to apply payments when there are different balances on the same rate. So you need to check very carefully that your payments will be applied to the purchases first. OR you could send the £1500 a couple of days after the 0% runs out on the purchases. Interest on £1500 at, say, 26.8% APR is only £1 a day.

debtcutter

Agree with chattychappy.

I don't think I've actually heard of a card with just 2 months interest free on purchases, but doesn't mean it isn't that.

Can you clear up which one it is makes_sense?

makes_cents

chattychappy wrote: »

Oh, hang on a tick.

Was this some kind of promotional offer you got with the card, not the usual "up to 56(60) days interest free on purchases if you pay your balance in full" thing?

If it's the latter, then you'll still be charged the interest because you wouldn't be paying the balance in full. (You'd only be paying off the purchases.)

BUT, if it's the former, then it seems both your BT and purchases are on the same rate of 0%. Different cards operate different rules as to how to apply payments when there are different balances on the same rate. So you need to check very carefully that your payments will be applied to the purchases first. OR you could send the £1500 a couple of days after the 0% runs out on the purchases. Interest on £1500 at, say, 26.8% APR is only £1 a day.

You are right. It was 60 days if the balance is paid in full, which I assume means my BT amount also.

I was charged interest this month.