MSE News: Tesco Bank credit card-holders stung with unexpected charges after...

Mr_Goodkat

GingerBob wrote: »

Yes, that's all very well for credit card train spotters, but the majority of people aren't such enthusiasts. This issue, regardless of the detail, has resulted in - apparently - a significant number of card holders being affected. That in itself points to a problem with the way Tesco have implemented the offer. It's like Very and their "BNPL but delivery isn't included" trap; all detailed in the T&Cs (in gobbledegook) but not explicitly enough.

I disagree that it is only 'credit card train spotters' as you put it that should and need to know this kind of thing.

I just don't understand why people would try to use a financial product in a different way to normal without understanding the implications.

enomis

I got this letter and promptly binned it - as a non-offer and quite frankly a waste of paper - as a customer that pays of their balance in full. It was quite clear to me that interest would be charged if I spent elsewhere and didn't pay the full balance. But from seeing this I guess Tesco got exactly what they wanted.

Paul_01

Mr_Goodkat wrote: »

I disagree that it is only 'credit card train spotters' as you put it that should and need to know this kind of thing.

I just don't understand why people would try to use a financial product in a different way to normal without understanding the implications.

You may disagree, but it is a fact that there is a lack of general awareness about many financial services and their implications. Many do not understand how APR's work, or why being on a standard variable mortgage is rarely a good thing. I'm not saying that it's ok to be unaware of such basics, just that the onus should be on the financial institutions to err on the side of caution and be explicit about offers such as this.

You (and they) are guilty of assuming that everyone has this basic knowledge - quite simply they don't.

Saying people should know as it's all in the Terms and Conditions, is ridiculous. Again, perhaps people 'should' read all T's and C's from front to back, but we all know they don't. So, the onus is on the financial institutions to make key points crystal clear.

JuicyJesus

GingerBob wrote: »

Yes, that's all very well for credit card train spotters, but the majority of people aren't such enthusiasts. This issue, regardless of the detail, has resulted in - apparently - a significant number of card holders being affected. That in itself points to a problem with the way Tesco have implemented the offer. It's like Very and their "BNPL but delivery isn't included" trap; all detailed in the T&Cs (in gobbledegook) but not explicitly enough.

I actually agree with this, and usually I am very "terms and conditions say X therefore Y". A reasonable observer would have taken the offer to mean what the punters the article thought it would mean, and that reasonable observer would have suffered a detriment as a result.

The way Tesco have done it, there is no way anyone who doesn't already incur interest on their credit card statement, or doesn't use their Tesco card for anything other than Tesco spend, can actually benefit from it. If you settle the card in full normally, you either don't borrow for 3 months anyway or you are going to get stung with interest; if you are already on a 0% purchases deal then there's no benefit. It's an offer with so many caveats that needed to be explained to be fair to consumers that it frankly shouldn't have been made at all.

It's also worth pointing out that Tesco's own card summary box says they will pay off items which attract the highest interest rate first with any payment. It is perfectly reasonable to assume that that means they will pay off non-0% purchases first.

http://www.tescobank.com/assets/sections/credit-cards/pdf/tesco-bank-cc-pur-summary-box.pdf?_=cachebuster20092016

MSE have a lot of stupid crusades for people who didn't read things properly; this isn't one of them. They have Tesco bang to rights. The way Tesco have done things is in a way that benefits very few people, incurs interest charges to a lot more and goes against their own published literature.

jamesd

Tesco did apply payments to the non-Tesco balances first. Then they did what has been standard credit card practice for decades and charged interest on transactions that are not interest free from the date of the transaction if the bill wasn't paid in full. None of this is in any way unusual.

Clearly there were some customers who don't know how credit cards work and got an unpleasant surprise that educated them about what they didn't know. It seems that Tesco are being kind and sensible given the lifetime value of a customer and forgiving the interest for anyone who does now pay off the full balance.

I don't think that they are being as wise as they could be, though. Would do more for long term customer value to educate and credit both this and next month's interest while leaving the Tesco purchases unpaid. That way the customers who don't understand the normal working of credit cards get educated and get the deal they wrongly thought they were getting.

Anyone mixing Tesco and non-Tesco transactions could potentially benefit from the deal. All it takes is the interest saved on the Tesco transactions exceeding the cost of interest on the rest. If the customer had another card with enough available limit that they could have put the transactions on and repaid in full they have been charged some interest that they could have avoided if they had a better understanding of how credit cards normally work. It'd have been nice if Tesco had assumed that lots of customers don't understand normal credit card billing and mentioned what would happen if you mixed interest free and charged transactions, though.

Yorkshire_Pud

Scenario 1 Spend useing Tesco CC over Xmas and all spend in Tesco is 0% but payoff balance in full. Benefit nil.

Scenario 2 Spend useing Tesco CC over Xmas and be encouraged to spend in Tesco as 0%, don't payoff in full and interest is less for a few months than it otherwise would be. Benefit to customer small as still have to pay off balance in the Spring and payments will be higher as encouraged to spend more over Xmas than would otherwise be possible. Benefit to Tesco, they get more Xmas business than otherwise would have.

Scenario 3 customer believes they can ring fence 0% Tesco spend amongst other CC use over Xmas and pays off non Tesco purchases but then finds its wrong and based on average balance. Benefit to customer dubious. Benefit to Tesco, they sell more than they would have if customer spent all day reading T&C for out of the blue special 0% offer plus Tesco make more in interest than their tricked customers envisaged because they expected Tesco to actually be giving them a decent offer not a tricky offer that needed a great deal of scrutiny.

Tesco made the offer to sell more specifically Tesco products at Christmas and encourage debt that would take longer to pay off as people may overspend and by confusion also cause some customers to end up paying interest who normall pay off their balance in full.

As offers go it was lousy:(

boo_star

Yorkshire_Pud wrote: »

Scenario 1 Spend useing Tesco CC over Xmas and all spend in Tesco is 0% but payoff balance in full. Benefit nil.

Scenario 2 Spend useing Tesco CC over Xmas and be encouraged to spend in Tesco as 0%, don't payoff in full and interest is less for a few months than it otherwise would be. Benefit to customer small as still have to pay off balance in the Spring and payments will be higher as encouraged to spend more over Xmas than would otherwise be possible. Benefit to Tesco, they get more Xmas business than otherwise would have.

Scenario 3 customer believes they can ring fence 0% Tesco spend amongst other CC use over Xmas and pays off non Tesco purchases but then finds its wrong and based on average balance. Benefit to customer dubious. Benefit to Tesco, they sell more than they would have if customer spent all day reading T&C for out of the blue special 0% offer plus Tesco make more in interest than their tricked customers envisaged because they expected Tesco to actually be giving them a decent offer not a tricky offer that needed a great deal of scrutiny.

Tesco made the offer to sell more specifically Tesco products at Christmas and encourage debt that would take longer to pay off as people may overspend and by confusion also cause some customers to end up paying interest who normall pay off their balance in full.

As offers go it was lousy:(

It was a lousy offer, certainly, but I have little sympathy for those caught up in this current "situation."

If you're not going to even attempt to learn how a financial product works, I'd be more than happy if you were no longer able to take out any financial products in the future.

The problem with companies offering refunds, as Tesco has done, is that in most cases people carry on believing that someone will bail them out. Instead of what should be happening, them educating themselves, or being educated by schools, the government etc.

redux

Paul_01 wrote: »

Most credit cards (certainly all the ones I have) apportion payments to the parts of a balance attracting the highest interest, it is therefore understandable that some people thought this would apply in these circumstances.

JuicyJesus wrote: »

It's also worth pointing out that Tesco's own card summary box says they will pay off items which attract the highest interest rate first with any payment. It is perfectly reasonable to assume that that means they will pay off non-0% purchases first.

But of course that does actually happen, as jamesd has already said, the money does indeed go against spending with the highest rate

But there is some contorted thinking going on here, or at least a gap. It is paradoxical to argue the interest should not have been added, then say this is the amount bearing interest.

Yes, the payment goes against the amount bearing interest, and stops the interest. But it stops it only from that point onwards; it doesn't remove the interest already due up to that point, unless statement paid in full.

So when using 0% offers, reduce other spending and/or the time it will be on the account.

Nebulous2

redux wrote: »

So when using 0% offers, reduce other spending and/or the time it will be on the account.

People on here are regularly advised not to mix 0% offers and normal expenditure which could attract interest on the same card.

This may have appeared to be different, but with a few exceptions, such as people who use a Nationwide card, or who have calculated the costs carefully and still see some advantage, that advice is very sound.

Crabman

Has the FCA commented yet?