Help! General credit card interest advice needed!

lozzimoos

Hi

I recently took out a credit card with MBNA to use for a money transfer to shift debt from a graduate overdraft.
Now, the promotional offer on the card was 0% for 24 months on money transfers and 0% for 3 months on card purchases.
I did the money transfer and set up a DD to pay this off over 24 months. I have also made a card purchase for around £50 which I was planning on paying off before August which would be when the 3 month promotional period ends.

Here is my question:
I have just done some digging and I found out that payments are allocated to the amounts with the highest interest rates first. The money transfer has a rate of 20.9% and card purchases 16.9%.
Am I right in thinking that as my DD payments will automatically be allocated to the money transfer balance, I will be unable to pay off the £50 for the purchase first, thus being charged interest on this until the money transfer balance is paid off?

Any advice would be appreciated

rabbit_burrow

I'm not sure how they will allocate the payments, you will need to ask them.

Regardless, if you do have to pay interest on the purchase, it'll only be around £9 per year until it's paid off, and I'm assuming you're looking at paying off the balance within the 24 month period?

lozzimoos

Yes I am planning to pay it off within 24 months.

Maybe I was panicking for nothing then. Sorry it's my first credit card and I am treading with caution!!

Thank you

rabbit_burrow

You're welcome

You'll get the hang of using credit cards. If you want to have a credit card to use for purchases, why not have a separate one, then you can leave the 0% with just your transfer on, and you'll have another that you can use for purchases. Only do that if you feel confident enough that you'll pay your purchases off in full each month though, so that you don't pay vast amounts of interest.

Tixy

If this is the clause from your t&cs

If the introductory rates have the same start date then we will pay off that part which will be charged at the highest standard rate at the end of the introductory period.

Then it does seem to imply that payments for the first 3 months will go towards the money transfer balances.
As soon as the 3months are up though then this bit kicks in

We allocate your payment to amounts that are charged at higher interest rates before those that are charged at lower interest rates.

So your next payment after the 3months would then go against the purchase balance as that will then have the highest APR.

So you'd end up only paying around 1 month's interest.

rabbit_burrow

Which would be about 75p