Credit Card Repayment structure bad for Consumer

DavyBoy_2

Martin,

I am wondering if you could write an article to help clarify the way that the money you repay to a credit card goes to clear off your debt you have on it. I have a couple of cards, (RBS Platinum and Halifax One), and Halifax One are up front about the way you get charged interest, and the way that your repayments work to clear your debt.
http://www.halifax.co.uk/creditcards/conditions_7331.asp (Section 3.6)

To everyone else, it is worth noting the way that your repayments work.
If you have £1000 of debt at 0% rate, £500 purchases at 14% rate, and £100 cash withdrawal at 22%, and you repay £100, where would you expect the money to go? If you are saying the cash withdrawal debt, then you are very mistaken (at least for Halifax, but I am guessing for all cards). Your debt will now stand at £900 debt at 0%, £500 at 14%, and £100 at 22%. Your repayment of £100 has done nothing to dent your monthly interest, and in fact won't do until you have cleared off all £1000 of the 0% debt, then you are still going to pay 22% interest on the £100 cash withdrawal until you've cleared off your £500 purchases.
So the golden rule is use a credit card for one thing only, if you are using the credit card as a 0% loan, don't spend ANYTHING on it, and don't withdraw any money using it, you'll pay through the nose for a very long time! I made the mistake, but am not stung too badly (about £9 interest a month), so now my 0% balance transfer card is solely my 0% loan, and my 0% purchases card is my stoozing card, and my debit card is for my cash withdrawal!

Beware the credit card companies, they'll use clever tricks to make money out of us one way or another!

Many thanks,

Davy Boy Hayes

DavyBoy_2

Also, it should be noted that RBS charge their 0% balance transfer fee back to the credit card, as a Purchase (as probably do other cards). So you can transfer £5000 and be charged a 2% fee (£100), and you'll be charged interest on that £100 for the lifetime of the loan. At 12 months balance transfers interest free, purchases at 14% that's an extra £14 in a year!