Confused over interest

Veggiesupreme

I've been working really hard to clear my debts and am on track to be debt free at the end of 2016.

I've recently done a money transfer of mortgage overdraft to credit card as 0% interest and 2.99% fee (saving me at least £100 before 0% period ends (when I plan to do 0% bal transfer).

However I'm a little confused re: interest rates on new purchases. I use my card and pay it off each month but I believe I'm now charged interest from the moment anything goes on my card instead of an interest free period (I understand this as balance not paid in full). At the moment I have £168 to pay if I pay this at the end of the month will I then be in the 0% interest bit? I would presume so as I think it should pay off what incurrs most interest but I don't want to assume and merrily be clocking up interest.

Thanks in advance.

warwicktiger

Don't use the card!
Most 0% balance transfer card deals will clear the 0% first, meaning you pay the full interest on all purchases until you have cleared the transferred amount!

If you NEED a credit card get a different one, but better still, don't use any until you have cleared the balance.

Cycrow

As you have a balance transfer on the card, you are not paying the balance off in full (as it will include the balance transfer).
Because of this, you dont get the interest free period and you will pay interest on any purchases from the day it goes on the card until the day you pay it off.

Payments will go against the highest interest items first. So if you have £190 of purchases (including interest) and pay back £200, it will clear all the purchases, and £10 of the balance transfer.

To reduce the interest, you could pay back the card earlier, after each purchase (however, wait until they appear on your statement before paying them off).

This extra interest is why its best to have separate cards for spending and balance transfers

[Deleted User]

warwicktiger wrote: »

Most 0% balance transfer card deals will clear the 0% first, meaning you pay the full interest on all purchases until you have cleared the transferred amount!

This hasn't been true for several years. All cards allocate payments to the higher rate transactions first.

MisterBaxter

warwicktiger wrote: »

Don't use the card!
Most 0% balance transfer card deals will clear the 0% first, meaning you pay the full interest on all purchases until you have cleared the transferred amount!

If you NEED a credit card get a different one, but better still, don't use any until you have cleared the balance.

Most if not all cards now apply the payments to the balance with the highest rate of interest but if in doubt check the T&C for your own card. I'm sure it's been like this for at least 3 years if not longer.

I do agree though that if possible keep a separate card for new spend to avoid any interest being accrued on that new spend, unless of course you aren't able to pay off the new spend in full in which case it may be better to add it to the 0% card so that more of your available money each month is paying off the higher rate balance. The other problem is of course that if you are only paying off the new purchases eventually your 0% period will end and that balance will also accrue interest.

I also agree that it would be better to pay off debt before taking on new but sometimes it isn't that simple.

Veggiesupreme

Thanks for all your replies. I only used the card because I got points but will now pay off the balance and any potential interest this month and then just service the debt and not use the card again until clear.

GWill71583

I have this same problem. I paid off more than my purchases before the due date (and more than the full BT and purchases before the next statement cycle) but still got charged interest the next month. I continued spending, as I would a normal card, but I expected no interest because I was paying more than the full purchases amount after the statement each month. I just feel like this isn't right. My statement still separates my BT amount from the rest at 0% but it appears that I need to get my actual balance to 0 at one point to avoid interest. I can't just use it and pay off the purchase amount each month. It essentially gives me to purchase after my initial balance transfer. Can this really be right/fair?

[Deleted User]

See my reply to your original thread.

It's right.

GWill71583

Yes, sorry - just seen your reply. It's disappointing that it works like that though. It essentially gives no incentive to purchase on a card with the 0% balance transfer.