Mixing balance transfer with purchases

xkpa

Hello. I am little confused how my future payments will be allocated. I know that mixing BT with purchases on the same card is not good idea, but it is already done, so need to handle it.

I have Tesco CC and have balance of £250 which is from purchases. And another £1250 is BT at 0% for the next year.

Am I right of thinking that when my next statement is available, the minimum payment will go towards the purchase amount, because it is at higher rate and this way i will lose my 0% BT promotional rate?

What's the best way to handle this situation? Thank you in advance

[Deleted User]

Payments are allocated to highest rate debt - so in this case purchases.

Your BT rate is unaffected, unless you miss payments or go overlimit.

To avoid paying interest on purchases, use another card to make them. In the meantime, make a payment that will clear the purchases to avoid paying interest over the following months (although you will still have interest to pay next month).

Dobbibill

xkpa wrote: »

What's the best way to handle this situation? Thank you in advance

You are correct, the purchases will be paid first.

Best way to handle this is:-
* Pay off the £250 ASAP. You will be incurring interest from the date of the transaction.
* Pay the trailing interest next month that you will have incurred, as well as your normal payment on the BT.
* Don't combine them again. Using a different card would mean you don't get charged interest from the date of the transaction, only if you fail to pay the statement in full. This gives you x amount of days interest free.

You won't lose your BT unless you have exceeded your credit limit.

xkpa

Thank you both for replies. So until i am paying my minimum payment, i will not lose my 0% deal, but i will only pay interest on my purchase balance until i pay it in full - correct?

Dobbibill

correct..........and pay the trailing interest the following month.

The longer it takes to pay off the purchase balance, the longer you will incur trailing interest. You will be paying interest on interest. The sooner it's gone the better.

chattychappy

The best way is to pay off an amount equivalent to the greater of your purchase amount and the minimum payment just after the statement date - don't wait until the "due by" date. If you have a DD, you may wish to investigate how it will interract.

Trailing interest will be relatively small, particularly if you pay just after the statement date. The BT still stands - you won't get interest on that.

Contrary to popular opinion, it can be a good idea to put such a purchase onto a BT card. It depends what else is going on with your finances. But the reason is that though you will pay some interest, you are in fact extracting better value out of your BT. To take an extreme example, if you make a purchase roughly equal to your minimum payment just before statement date and pay just after statement date, you will pay almost no interest. But by diverting your minimum payment to the purchase, it is equivalent to getting 0% on that purchase for the rest of the BT period. (Because though technically you paid the purchase amountoff, your BT balance is now higher by the same amount for the rest of the period.)