Question balance transfer Credit card, 0 % spending balance (how is purchase interest calcuated)

Nesty

Hi All 

Just got a quick question about balance transfer Credit cards, with a spending 0 % spending balance, for a certain period.

I transferred a bigger balance over recently, from another card, the card had 27 months interest free on balance transfers & 6 months, 0% on purchases to June 2025. 

Anyway, over Christmas I used about £300 on purchases for Christmas presents. 

My question is, obviously I will be making monthly payments, but say I pay over £300 towards the statement, in 6 months does that clear the £300 of purchases, or just the amount from the statement, so assume I’ll be charged purchase interest, until I clear the entire statement balance, because it's lumped into one?  

I suppose this is where they catch you, I didn’t think about this, as haven’t done balance transfer for sometime.

TadleyBaggie

Rule of thumb, never using a credit card for regular spending if you are carrying a 0% balance transfer on it. It gets very confusing as to what balance gets the payment allocated to.

Nesty

TadleyBaggie said:

Rule of thumb, never using a credit card for regular spending if you are carrying a 0% balance transfer on it. It gets very confusing as to what balance gets the payment allocated to.

many thanks for this, I just didn't think, a long time since done balance transfer on a card. 

Can I write to them including an extra payment to specially allocate it to the purchase balance, surely under financial rules, they must be able to give you the option of clearing your purchase balance, before applying any interest?  

Brie

I don't quite understand what you did but here's my guess.

My guess is that you had a card with a large balance and you did a 0% balance transfer to clear that.  But you also used that BT card to buy some stuff for Christmas.  So now that BT card has the 0% amount plus £300 in purchases.

If this is the case then the £300 will be accruing interest at the purchase rate from the day you bought things.  So let's say it's 28%.  So the sooner you pay that off the less interest you will be charged.  Money paid to a card with more than 1 interest rate being charged will always be applied to the higher rate first.  

Now the problem is that some banks won't acknowledge the higher rate until the next statement is actually issued.  So if you paid the £300 now it would be applied against the earlier transaction which is at 0%.  And come statement day interest of 28% will be showing on the £300 from whenever that was spent.  

What you need to do is contact the bank and get them to confirm what happens to a payment made before the statement date.  If they say "if you paid us £300 today it will wipe out that 28% balance and the 0% amount won't be reduced" that will be great.  Get their name and note the date/time of the call or get a screen shot of the chat.  This is just in case they do something different.  Otherwise wait until the statement date and pay the £300 (or as much as possible) asap.  

You no doubt have set up a DD to at least take the minimum payments and if you make an earlier payment the DD may or may not be taken (different cards do different things).  But because you have made something in excess of the minimum your 0% offer won't be effected which is good.  

Brie

Or do you have a card with both balance transfer and purchase at 0%?  And did a large BT & then made a few purchases.  In which case any payments made will be applied to the earliest transaction as they are all at the same interest rate.

In which case you could set the DD at the minimum and save up to clear the £300 on the day after they start charging you interest.  That way you should only be charged the higher interest for 1 day which will be minimal.  And there may be a tiddly bit of trailing interest in the month after.  

Nesty

Hi Brie 

Many thanks for the reply. 

What I did, I applied for the Halifax balance transfer card, I then transferred a large amount across from another card. 

That all got processed fine. 

A few weeks later, I then discovered I had 0 % on purchases until June 2025 on the Halifax BT card, I thought ok, I’ll purchase some Christmas presents, (£300), then pay it back in 2025. 

However, after I  made the purchases after I thought, how are the payments going to be allocated, how do I clear the purchase balance? 

Hence, now why I am here! 

Brie

In that case it's the situation as in my second post - the much shorter one.  

Closer to the day I would still suggest you ring/chat with them and ask "what's the first day I can pay off the £300 and have the least interest accrue?"  They'll either give you the right answer (hopefully) or they'll give you the wrong answer.  Whatever - follow their advice on when to pay and if they got it wrong you can complain saying "Bob at this date/time told me and that's wrong. Please compensate."   And they should correct the account and refund any interest charged incorrectly.  And maybe give you £5.  I've had this happen numerous times.

Nesty

Many thanks for that, explains it really well, appreciate it. 

molerat

Have you tried reading the T&Cs that came with the card ?  Always a good place to start as it avoids speculation and usually has the required information.

If there is more than one type of balance at the same interest rate, they are normally paid off in the following order: cash
transactions, purchases, balance transfers and money transfers, and then default charges (plus any interest or charges incurred
as a result of those balances). For each type of balance, your payments will pay off the oldest balance (and related fees, charges
or payment protection insurance) first. We may apply your payments differently if you are in persistent debt (see B7.8 for
details).

So all payments will go towards the purchases.  Type of balance comes ahead of age of balance.

born_again

Nesty said:

TadleyBaggie said:

Rule of thumb, never using a credit card for regular spending if you are carrying a 0% balance transfer on it. It gets very confusing as to what balance gets the payment allocated to.

many thanks for this, I just didn't think, a long time since done balance transfer on a card. 

Can I write to them including an extra payment to specially allocate it to the purchase balance, surely under financial rules, they must be able to give you the option of clearing your purchase balance, before applying any interest?  

I would say no. As they will have n way of taking a payment in office.

Best bet is to wait till you get the statement with these purchases on. (pay before that & it just goes to previous statement balance)

Look at previous statement & how much was due to be pai on transfer.
Add a few ££ onto that amount. Total up your purchases & add that amount to the other amount. That is the only possible way you will avoid any interest on the purchases.

Nesty

Many thanks for the all the replies, things now look a bit clearer.