Tesco Balance Transfer Offer - Misleading?

andymd

Hi,

I'm not sure if I have misunderstood the rules, but I feel my recent experience with my Tesco credit card is unfair.

I have a Tesco credit card which I use every month for purchases and usually pay off in full before the due date.

A couple of months ago, I received a balance transfer offer from Tesco. I was about to get married and money was tight so I made a balance transfer for £1500, which was apparently free for 6 months. I knew there was a 2.9% fee (which incurs standard interest) and I would be able to pay off the balance in full after 6 months.

In last month’s statement, my balance was £ 3,679.18, of which £1500 was the promotional balance and the rest new purchases. I made a payment of £2384.19, more than clearing the standard balance (and some of the BT) on the card well before the due date. As a result I expected no interest to be charged.

However, in my latest statement, I have been charged £38.23 interest on my standard balance. I spoke to Tesco to query why this has been charged and they insisted I need to pay off the full balance (including the interest free balance) in full to avoid paying interest on standard balances.

This seems to make the ‘interest free balance transfer for 6 months’ pointless as it has caused me to incur interest on my standard balances. They claim this is absolutely fair and is standard industry practice (Which I doubt is true as I had a similar issue last year with HSBC who acknowledged immediately it was their mistake and refunded the interest)

If Tesco are correct, this seems quite unfair to me, particularly as the balance transfer fee was not interest free, so even if I didn't use the card for anything else, I would incur interest on the fee for 6 months, unless I paid the card off in full straight away!

I have registered a complaint with Tesco but they insist there is nothing they can do and it is completely fair (although they admit many people complain about this and it could be made clearer)

I know the simple solution is to stop making purchases on this card until the BT is repaid in full, but I prefer to use this card for purchases as it has clubcard points.

Any advice what I should do next?

Many Thanks

Andy

[Deleted User]

Tesco are correct. This is absolutely standard practice. You need to clear your balance in full each month to beneffit from the interest free period.

You are also incorrect in thinking you would have paid interest on the fee for 6 months. It would have been paid off with your first payment, as it is interest bearing.

HSBC will have refunded you as goodwill, not because of an error.

You'll need to choose whether you want to continue to use the card for purchases or not.

andymd

Thanks for your reply. Good point on the fee!

Is this really standard practice? The HSBC refund was definitely not goodwill. The same thing happened for the first three months of the BT and each time they admitted it was a mistake and refunded the interest. They said it was a system problem. After 3 months they resolved the problem and since then as long as the purchases are repaid in full they don't charge interest, even if a promotional balance remains.

What is the point of a 6 month free period if you have to clear the balance in full? Then you only get a few days free.

Seems like Tesco have a different policy to HSBC and if it's correct I'll live and learn, but seems quite unfair.

[Deleted User]

Defintely standard practice. Including HSBC - see their terms here-

You will not pay interest on purchases if you pay your balance in full and on time each month. Otherwise, the period over which interest is charged will be as detailed in the table below. For Cash Advances and Balance Transfers any interest charge for the period from the previous statement to the date of full repayment will be debited the following month. Interest will not be charged on Default charges.

It's generally best to avoid mixing BTs and purchases because of this.

Cornucopia

Standard Practice - yes, but not universal.

The issue is negative payment hierarchy (I think that's what they call it).

But then I found this: http://www.which.co.uk/news/2011/01/new-rules-to-speed-up-payment-of-credit-card-debts-240548/

So perhaps more complicated than that?

Anyway - there are positive payment hierarchy cards out there, and there are cards with simultaneous 0% offers running on both Purchases and BTs where it doesn't matter.

[Deleted User]

Negative payment hierarchy was something else, and is no longer allowed. This is simply down to the pay off in full and pay no interest quirk that credit cards offer. It really does mean pay off in full, not just pay off the interest bearing bits. Catches lots of people out.

Cornucopia

Hmmm...

Sounds like the same precautions are necessary as were for NPH.

Given that the primary purpose of a credit card account is to make purchases, it does seem a bit misleading to offer a "6 month 0% BT" if that can only be fully utilise when your account is clear before you start and you make no purchases. IIUC.

A post with a link to MSE advice on this seems to have dropped off the thread. Here is the link again: http://www.moneysavingexpert.com/cards/balance-transfer-credit-cards#never

cannyscot_2

Highlighting this Andy has saved me -so thanks!

We have just done some major balance transfers but are a bit green.

I didnt think about the transfer fee incurring interest. So on a halifax card where the min payment is 1% then it will not pay off the BT fee so I'd be better putting any excess money this month to that? It is a minefield!

grumbler

cannyscot wrote: »

Highlighting this Andy has saved me -so thanks!

We have just done some major balance transfers but are a bit green.

I didnt think about the transfer fee incurring interest. So on a halifax card where the min payment is 1% then it will not pay off the BT fee so I'd be better putting any excess money this month to that? It is a minefield!

See this recent thread: Warning: Post office Credit Card charging interest on fee!

Cornucopia

I've read all of the posts & links and I still don't understand why the OP was charged that much interest. It doesn't seem to fit the explanations provided.

I've not got that much experience of BTs, because I avoid paying CC fees or interest (have avoided them for years). But, I would like to understand this issue, so I can maintain my record in the future.

grumbler

£38.23/(£3679.18-£1500)=1.75%
Not that much for 26-56 days (depending on when purchases were made)