Can banks pay off interest free component of balance first?

Gidans24

Hi there, bit of a complicated one, searched but not managed to find elsewhere.

So I have a balance transfer card, and it had a three month interest free on purchases.

Transfered a balance of 2k across and spent 1k. As the three months was coming to an end I paid off the 1k.

However my statement says that I have a "transfer balance" of 1.5K which will remain interest free for the rest of the term and a "purchases" balance of 500 pounds which is now liable for interest.

Seems like they used half the 1k I paid back to go towards paying off my balance transfer...

Is this normal?

Any advice welcome

Thanks

[Deleted User]

They will always pay off highest interest first. However, that generally applies to statements transactions.

If you have two balances at the same rate, you need to check which one will be paid.

boo_star

Paying "high to low" only applies to balances that are accruing interest, so credit card companies are allowed to pay off amounts that will be accruing interest first, if none of the balances are currently accruing it.

It would appear that is what has happened here.

blue.peter

Gidans24 wrote: »

Seems like they used half the 1k I paid back to go towards paying off my balance transfer...

Is this normal?

Any advice welcome

Thanks

I'd expect that the bank will have a set order in which they allocate payments. This will be published. I see from a couple of my recent statements that American Express and MBNA both include statements on this subject in Summary Boxes printed on the last page of their statements. They're different from one another, so it looks as if it can vary from one bank to another.

I suggest that you look at your statement, and see what it says. If the information isn't there, try the bank's Ts & Cs (they'll probably be available online if you don't have a printed copy).

If the bank's actions aren't consistent with their statement on allocation of payments, you could query it with them and maybe (if appropriate) escalate it into a complaint.

Ben8282

What has happened is quite unusual. Can you confirm that the purchases transactions actually appeared on a statement before you repaid them?
It would also help if you could name the card issuer.
Also your figures don't add up in the sense that your payment of £1k appears to have been split equally between the purchases and balance transfer which makes no sense from a payment allocation point of view. I strongly suspect that only £500 of the purchases were actually statemented when the £1k payment was made.

Gidans24

Hi all, thanks for all your responses. Ben I feel like this may be what has happened. As the statement generation date was 6th November and the date that the purchases balance became interest liable was also the 6th Nov, so I rushed to pay off the "purchases" balance by paying off what I had worked that out to be from the account balance, not the statement.

I'm assuming I'll have to pay off the remaining "purchases" balance "again" to avoid interest?

Many thanks
Sam

Gidans24

*also forgot to say, my figures don't add up as I just used simplified figures to illustrate the point, apologies should have stated this.

System

They do sometimes get the order wrong and have been known to fix things when incorrectly applied. Give them a call and explain the situation and ask what's happened here. At a guess, I would say that your repayment went onto the balance transfer amount before the purchases actually converted to become interest-bearing - which might have actually kicked in on the 7th (so the bank has technically applied this correctly since all the amounts were interest free at that point) but that isn't much comfort to you if it's the case - I would think you have a fair case for arguing that according to the information you were given you could not have known this would happen, and they might well fix it.

Ben8282

Gidans24 wrote: »

I'm assuming I'll have to pay off the remaining "purchases" balance "again" to avoid interest?

Many thanks
Sam

Unfortunately yes.
That is why these short 3 month 0% purchase offers can be tricky. They can be useful in certain very specific circumstances but you really have to cease all purchases before the generation of statement 2 so that you can repay the statemented purchases on statement 2 before the statement 2 payment due date and before statement 3 is generated.

chattychappy

Worth a call. For the sake of good will and avoiding any ongoing complaint (whether or not justified) they may well reapply the payment to the purchases. Assuming the operator knows how to do it!