When is 0% Balance Transfer not INTEREST FREE...?

paulypost

Answer:- when you use that card for on-going purchases. Yes, sounds crazy but here's the story.

I processed a £1900 transfer to my Santander card in October in response to a pop-up offer aimed at existing customers. Next two statements had a total of £150 interest even tho I had paid off the total for purchases IN FULL. Both times I got the interest refunded but was told I should go on by netting off the trans balance each month and that would be ok.

But more interest taken in Jan. Very helpful CSR refunded it and raised an official complaint on my behalf and they called me back. Who knew? Banks that call you back! I even got a £70 'compensation' payment in respect of future interest. However, the crazy clear message was that the interest on the purchases would continue and that even though technically no interest had been charged on the transfer I would continue to incur charges on purchases for the duration of the 0% period - to Sept 25. Their process cannot take account of interest free transfers sat alongside purchases.

So two choices - either pay off the total balance in full to avoid interest completely i.e. not take advantage of the 0% period at all or use another card for the duration. Yes the Santander agent actually suggested I use another bank's card! That's even crazier?

Any similar experiences to share?

eskbanker

You're not the first to encounter this but it's exactly how credit cards work, i.e. interest is only waived if settling the entire balance in full every month, which is why it's always best to avoid using a 0% balance transfer card for purchases.  Even if you settle the purchases element, there will still be trailing interest applied the following month - if you just make a single purchase during the 0% period then you should be able to pay it off and be clear of interest again after two months, but if you continue to make purchases then you'll continue to incur interest....

zagfles

The general rule with any loan is that you pay interest on the amount you borrow from the date you borrow it till the date you pay it off. With credit cards there is a specific exemption to this, where if you pay your statement in full you're not charged any interest. 

The way banks treat promotional balances varies. With Barclaycard and Nationwide for instance, the specific exemption applies if you pay off the statement balance excluding promotional balances at 0%. With others, the specific exemption is only triggered if the full statement balance is paid.

The summary box of the credit card should tell you. Eg from Nationwide: "Interest will not be charged on purchases if you pay the total balance (excluding balance transfers on your introductory rate or any other promotional rate) shown on your statement by the payment due date" 

If the bracketed bit isn't there, then you don't trigger the interest exemption on purchase interest unless you pay the total statement balance off, which makes the card useless for purchases if you have a 0% balance transfer on it. The last Santander card I had didn't have this bit. So don't use the card for purchases if you have a 0% BT on it. 

It sounds like Santander CS didn't understand this either which is why they refunded/compensated you. It seems few bank CS staff actually understand their own products. 

molerat

The heading is misleading / false.  The balance transfer is and remains interest free.  The purchases, as is normal with the majority of cards, are not.  I am surprised after this time that this still catches people out.  The card rules are quite simple, pay off the entire statemented balance IN FULL , as screamed by Martin Lewis, and you will pay no interest.  Anything else is likely to incur charges.

born_again

paulypost said:

Answer:- when you use that card for on-going purchases. Yes, sounds crazy but here's the story.

I processed a £1900 transfer to my Santander card in October in response to a pop-up offer aimed at existing customers. Next two statements had a total of £150 interest even tho I had paid off the total for purchases IN FULL. Both times I got the interest refunded but was told I should go on by netting off the trans balance each month and that would be ok.

When were you paying the amount of the purchases you made?
Seen people pay them back same day 🤦‍♀️when they could just have used their debit card.

If you pay them back before they are on the monthly statement, then you are simply paying towards the last statement balance & not the purchases made.
So you will incur interest, as they will not get paid for till the statement after.
Many people make this mistake.

Best way to do this is.
Wait till you get your statement with the balance & purchase on it.
Total up your purchase spending. add the min amount required & a bit more for luck (brings balance down faster as you should be doing. Then pay that before the due date.
Rinse & repeat each month.

As well as never mix spending with a balance transfer card. 

teaselMay

zagfles said:

The general rule with any loan is that you pay interest on the amount you borrow from the date you borrow it till the date you pay it off. With credit cards there is a specific exemption to this, where if you pay your statement in full you're not charged any interest. 

The way banks treat promotional balances varies. With Barclaycard and Nationwide for instance, the specific exemption applies if you pay off the statement balance excluding promotional balances at 0%. With others, the specific exemption is only triggered if the full statement balance is paid.

That was a pleasant surprise, thank you zagfles, you've made me go and read my Barclaycard statement, I've a 0% transfer on it and then had to use it at the vets couple of weeks ago - I've a spare but it was the only card I could remember the PIN of! I'd thought I'd be paying a couple of weeks interest, which is fine, needs must in the circumstance (RIP Stanley Man) but Barclaycard says:

Interest Free Period • Maximum 56 days from date of new transaction - (including new purchases and cash withdrawals) if you pay your main balance (excluding any promotional balance with a 0% interest rate) and any monthly instalment plan payments (if you’ve taken out any instalment plans) in full and on time each month. Note - Your main balance is your current statement balance less any instalment plan balance. • Any instalment plan you take out is interest free until the end of the plan

And elsewhere clearly states my main balance as that vet transaction only. So no interest after all as I'm paying more than the vet bill off it tomorrow.

zagfles

teaselMay said:

zagfles said:

The general rule with any loan is that you pay interest on the amount you borrow from the date you borrow it till the date you pay it off. With credit cards there is a specific exemption to this, where if you pay your statement in full you're not charged any interest. 

The way banks treat promotional balances varies. With Barclaycard and Nationwide for instance, the specific exemption applies if you pay off the statement balance excluding promotional balances at 0%. With others, the specific exemption is only triggered if the full statement balance is paid.

That was a pleasant surprise, thank you zagfles, you've made me go and read my Barclaycard statement, I've a 0% transfer on it and then had to use it at the vets couple of weeks ago - I've a spare but it was the only card I could remember the PIN of! I'd thought I'd be paying a couple of weeks interest, which is fine, needs must in the circumstance (RIP Stanley Man) but Barclaycard says:

Interest Free Period • Maximum 56 days from date of new transaction - (including new purchases and cash withdrawals) if you pay your main balance (excluding any promotional balance with a 0% interest rate) and any monthly instalment plan payments (if you’ve taken out any instalment plans) in full and on time each month. Note - Your main balance is your current statement balance less any instalment plan balance. • Any instalment plan you take out is interest free until the end of the plan

And elsewhere clearly states my main balance as that vet transaction only. So no interest after all as I'm paying more than the vet bill off it tomorrow.

As long as the vets bill is statemented, payments always go toward statemented balances before unstatemented. 

teaselMay

yep it's on the statement from last week, thanks

paulypost

Many thanks for all the comments. Certainly an eye opener that this is a thing? To my knowledge it's never come up on Martin's show. I am a regular user of balance transfer cards but have never come across this before.

Not only did Santander not point the purchase interest process out they also did not point out that a 3% transfer fee applied. On appeal I got that refunded also. So I suppose my header is a bit misleading because at the moment I'm up about £250 on the whole thing, always providing I pay off the balance IN FULL which of course I did not expect to have to do until Sept 25