Credit card query

mo786uk

Lets say I get a credit card with 0% on purchases for 12 months and then 20% interest thereafter

It also had 0% balance transfers for 24 months and 20% thereafter.

My understanding is that the norm is that the 2 aspects are treated differently.

Therefore in month 13 if I had £1000 of purchases and £1000 of balance transfers I would pay interest on the purchases but the balance transfer amount will still be 0% as it lasts for 24 months.

I believe that has been the case for the 5-6 cards I have had in the past.

Today a friend told me their card, after you get past 12 months, the balance transfer becomes part of the 'total balance'. So if you have purchases of say £1000 and balance transfer of £1000 - unless you pay off the full £2000 you get charged interest because they say you cannot get interest free on the purchases if you have not paid the FULL balance inc the balance transfer

what this in effect means is that after 12 months it is possible the balance transfer can attract interest if you make purchases and do not pay the purchases/balance transfer amounts off.

i understand a cc can do whatever they want but is this now the norm and should a card be advertised as 0% balance transfer for 24months without making this restriction clear?

YorkshireBoy

The BT remains on 0%.

Assuming you make no further purchases after 12 months (which you shouldn't!), there will be a very small amount of residual interest going forward on the purchases balance...pence if you time your payment properly, ie immediately after statement date.

Don't ask your friend any more questions about credit cards...or if you do, don't listen to the replies thay give!

mo786uk

Said person complained to the FOS who said the terms made it clear and that was that

we don't doubt the terms say it and that is what was signed - the issue is whether the card should be advertised at 24months interest free balance transfers when it is highly likely the person will retain a balance on the BT but want to make purchases.

in theory if they make purchases on a normal card and pay it off they don't get charged interest. so in theory you could (on a normal card) retain a BT on 0% and then pay off all purchases and pay no interest - as I understand it. on this card the moment you make a purchase past the interest free period you will start getting charged interest if you have a balance on the balance transfer.

the card in question definitely works the way i suggested in my OP and the card provider and FOS have confirmed so.

SuperAllyB

The balance transfer itself does not attract interest even if you make any purchases. The problem is that the purchases do attract interest due to the fact that you are not paying off the full statement balance.

YorkshireBoy

mo786uk wrote: »

the issue is whether the card should be advertised at 24months interest free balance transfers

Yes, because that's what it provides...24 months 0% interest on the amount transferred to the card.

when it is highly likely the person will retain a balance on the BT but want to make purchases.

Why is it "highly likely" they'd want to use it for purchases? Are you saying most people don't understand how credit cards work?...or are you saying most people don't read the T&Cs?

in theory if they make purchases on a normal card and pay it off they don't get charged interest. so in theory you could (on a normal card) retain a BT on 0% and then pay off all purchases and pay no interest - as I understand it.

Your understanding is wrong I'm afraid. What you're describing here is what happens with all cards of unequal duration 0% offers...in my experience of credit cards over the last 8 years or so.

The underlying 'rule' is that all transactions on your credit card incur interest from day one until you completely clear the entire balance...and this includes purchases.

If, and only if, you clear the entire balance (and the one on the preceding statement) by it's due date, they will waive this interest charge on purchases only (usually...sometimes cash & BTs as well on a select few specialist cards).

mo786uk

SuperAllyB wrote: »

The balance transfer itself does not attract interest even if you make any purchases. The problem is that the purchases do attract interest due to the fact that you are not paying off the full statement balance.

Indeed

I should have said, the added complication is that the card gets loyalty points. so the user cannot get free loyalty points at a particular store with new purchases because they will be paying interest if they have a BT balance.

there is effectively a significant restriction in the way the card works that should or could have been made clearer.

YorkshireBoy wrote: »

Why is it "highly likely" they'd want to use it for purchases? Are you saying most people don't understand how credit cards work?...or are you saying most people don't read the T&Cs?

What I am saying is that once the 0% on purchases has run out it is highly likely a customer will still want to use the card for purchases - after all that is the whole point of the card. i appreciate a lot of people will just find a new 0% card but that is irrelevant.

I am fairly sure i have had cards where the BT stays 'independent' from the purchases but this goes back a few years when everyone was giving away 12 month 0% deals so not a reflection on current times.

---

I notice Tesco are doing exactly what i have suggested but to be fair they make it crystal clear

http://www.tescobank.com/personal/finance/finance/creditcards/bt/index.html

I can only go on memory but i am sure this was not standard a few years ago

i spose the moral of the story is that one the purchases period runs out then you might as well stop using the card for purchases - which of course makes getting loyalty points impossible - which was one of the main reasons the person signed up to the card.

jonesMUFCforever

There is no restriction at all. You make the decision to make purchases on a balance transfer card then you choose to pay interest on those purchases.
Most sensible people would have 2 cards.

mo786uk

jonesMUFCforever wrote: »

There is no restriction at all. You make the decision to make purchases on a balance transfer card then you choose to pay interest on those purchases.
Most sensible people would have 2 cards.

Why advertise it as x months free loyalty points with x months free balance transfer when you cannot actually get the loyalty points without incurring costs if you make use of the balance transfer for the full length of the 0% period.

the issue is not with the legality of the way the card is set up but with the way it is advertised to people before they enter into the agreement - which is why I am trying to find out what the 'norm' is.

anyhow, the fact that this may be the norm does not necessarily stop the advertisements being misleading - but i spose you really have to see the leaflet. its an offer very similar to the Tesco link but Tesco have foreseen the need to add the disclaimer.

its irrelevant what sensible people would do within the scope of this question because the whole point of taking out the card was to get loyalty points for a certain duration which is restricted by the way the card calculates interest.

YorkshireBoy

mo786uk wrote: »

...the whole point of taking out the card was to get loyalty points...

If the "whole point" was to "get loyalty points", why transfer a balance to it (without first reading and understanding/questioning the T&Cs)?

Speaking of T&Cs, if you say which card you're talking about I'll refer you to the appropriate condition within the T&Cs.

I could also take a look at the advertising, if it's available to view online.

mo786uk

OK to word it better it was a 'strong pull factor'. (my words)

They probably assumed that because you get x months balance transfer at 0% it would not affect the ability to get loyalty points via purchases. IMO the restriction is significant enough to warrant mentioning.

As I said at the start the issue is not with the way the card works but with the way it was advertised. the person has contacted the CC company and even their staff were confused by the restriction as it massively defeats the point of getting it for the loyalty points for some people.

as for why they didn't read the terms - probably because they thought the BT would not restrict the ability to get loyalty points through purchases.

they used it as a normal credit card (bt and purchases) not thinking such a restriction applied and only found out after 6 months when the purchases 0% ran out. the complaint is not so much about the customers specific issue but whether or not the advertising material is clear enough

what is relevant is what happens at the point of sale. yes the person could have read all the terms and conditions before they signed up but given the advertising it seemed reasonable that loyalty points could be gained regardless of the BT as the BT was interest free.

the actual advert was a leaflet which i don't have on a PC at the moment

SuperAllyB

Is it misleading though? They can still get loyalty points if they really want them, although having to pay interest will more than negate any advantage.