0% balance transfer, making purchases with interest

Anthorn

Deleted_User wrote: »

Indeed.

To benefit from a waiver of interest, the entire balance - including the BT - needs to be cleared. If the OP isn't doing that, the the purchases should be cleared as soon as they have statemened to minimise interest.

It's still beyond my understanding. I knew there must be a reason why I don't get mixed "bit of everything" cards. (Quote from Virgin Money CC application done a few hours ago just to test it for a thread.)

bigadaj wrote: »

Isn't nationwide the exception that otherwise proves the rule?

Oh well, in that case ...

Nebulous2

Anthorn wrote: »

This is beyond my understanding: Surely if the full balance (of purchases) is paid by or on the due date there is no interest to pay and it doesn't matter whether it's a DD or manual payment.

It's quite sensible. On most cards if you have not cleared your balance, because you have a 0% interest deal you will pay interest from the day you make the purchase until it is paid off.

What he is saying is if your DD is enough to cover your purchases it will not go to your credit card account until the last possible day. If you make an earlier manual payment instead, which again is enough to cover your purchases, then that will reduce the amount of interest you pay.

chattychappy

Nebulous2 wrote: »

It's quite sensible. On most cards if you have not cleared your balance, because you have a 0% interest deal you will pay interest from the day you make the purchase until it is paid off.

What he is saying is if your DD is enough to cover your purchases it will not go to your credit card account until the last possible day. If you make an earlier manual payment instead, which again is enough to cover your purchases, then that will reduce the amount of interest you pay.

Yes, thanks. That was my point.

The "golden rule" that you should never mix purchases onto a BT card dates back to the days of the "negative payment hierarchy" when any payments made would be applied to the BT balance before any purchase balance. Therefore to stop interest running on purchases you would have to pay off the entire balance, including the BT deal. That has all been stopped. Nowadays payments are first applied to (statemented) non-promo balances. So if you put a purchase onto a 0% BT card, you will only get interest on the purchase until enough payments arrive to pay off the purchase. (And a couple of cards including Nationwide even don't charge that.)

So for most cards, as I said before, if you have put a purchase through on a 0% BT card, then really you want to pay it off as soon as possible after the statement date, rather than have the funds hanging around in a current account waiting for DD day whilst racking up daily interest.

Not to mix is still a good "rule of thumb". Better to put the purchase onto a separate card and get up to 56 days interest free.

BUT, it can work well. Eg if you have just started an 18-month BT deal and paid, say, 3% for the privilege. Each month you will have to pay off a minimum, which will chip away at the balance. Let's say the balance is £5000 and your minimum is £100 (2%). In this case, just before statement day, consider putting up to £100 of purchases through. The statement will be generated and you will have a balance of £5100 and a minimum of £102. Pay this right away. You will have tiny interest (a few days' on £100 - let's say a week at 26% APR, that's 0.5%, or 50p) and the balance will be back to around £5000.

So for your 0.5% interest charge, you have gained 17-months' interest free on the £100 - because your payment which would otherwise have paid down the promo balance has been diverted to your purchases. 0.5% is not bad compared with typical BT fees of 3%. You are effectively extracting better value out of the original BT deal. Of course, as you near the end of the promo period, it's not so great. 0.5% for 3 or 4 months isn't so good. On the hand, you may well have a purchase rate of less than APR 26% and/or can get things down to less than a week. (I chose that APR because it's the highest rate I have on my cards, most are well under 20%.)

Of course, it's even better to get a separate 0% on purchases card. But, in the absence of this, the above can work well. Certainly the "golden rule" is no longer golden.