Lost my balance transfer CC amount, because of new spending & repayments?

i_like_cats

A few months ago I got a new credit card.  I did a £1000 balance transfer and the limit is £3500.

Since then I have done quite a lot of spending and made a lot of repayments.  Now there’s £1200 on the card.

In my mind I was expecting £1000 would remain interest-free for the advertised 21 month period, and I’d only be paying interest on the £200 that I’m currently over that.

However looking at the latest statement they’re saying only £200 of the transferred balance is now interest free!  Because I’ve spent about £800 and made payments of £600.  And I’ll immediately be paying 26% or so interest on the other £1000!

I was imagining it would be like a zero interest for new purchases card and I could keep on spending and making repayments while retaining the £1000 buffer that would never have interest charged on it for the agreed period.

I’ve fallen into a trap, haven’t I?
 

eskbanker

Yes, you've fallen into a trap, if you wish to call it that, in that mixing 0% balance transfers and new purchases almost always results in interest charges, which are only waived when repaying monthly balances in full, something that you wouldn't typically want to do after transferring a balance.

However, if the actual 0% balance has reduced by that much, that would imply that your repayments have been allocated to that rather than the new spend - repayments should always be allocated to the part of the balance with the highest interest rate provided that the relevant transactions have been statemented.  Have you been repaying as soon as you've been spending or waiting for statements?

Your card Ts & Cs should explain how repayments are allocated....

i_like_cats

I’ve been spending and repaying within the same calendar month - December/January in particular - but never clearing the whole balance as I didn’t have it, and anyway thought £1000 would remain interest free.

I might try calling them to see if they’ll reinstate any of the interest free amount as a “goodwill gesture” but I expect they’ll tell me I’m out of luck.

Of course a way out of this is to do ANOTHER balance transfer to a new card for £1200 and never touch it, just make the repayments over 21 months.    Though the interest rate would be worse, that wouldn’t matter if I didn’t touch it & paid it off in time.  

Of course I’d also need to not spend anything on this existing card, & possibly close it down.  
 

Hoenir

i_like_cats said:

I’ve fallen into a trap, haven’t I?
 

No trap. All clearly explained in the terms and conditions of the account. 

Olinda99

yes keep the BT card only for BTs

don't spend on it - get a second card for that

surreysaver

Have you made a payment before you've actually received a statement?  This commonly happens when people think they're paying off some spending, when in fact they're paying off part of the last statemented balance.
You need to wait until your spending appears on a statement before paying it off.
Or, the best thing, is don't mix 0% deals with anything else, unless you fully understand the T&Cs and know what you're doing. 

CliveOfIndia

i_like_cats said:

Of course a way out of this is to do ANOTHER balance transfer to a new card for £1200 and never touch it, just make the repayments over 21 months.    Though the interest rate would be worse, that wouldn’t matter if I didn’t touch it & paid it off in time.
 

This would certainly work - assuming, of course, you can get accepted for another 0% BT card.  Of course, there will more than likely be a fee for doing the transfer, but if you're now lumbered with paying 26% interest on the existing card, it'll be worth it.

i_like_cats said:

Of course I’d also need to not spend anything on this existing card, & possibly close it down.  
 

Once you've cleared this card in full then there's nothing to stop you from spending on it if you wish - as long as you always repay in full every month then you won't pay any interest.

Of course, if you have no need for the card then yes, it makes sense to close it.  Particularly if you've only had it for a very short amount of time, you won't even benefit from having a long-standing line of well-managed credit on your file.

If you want a card for everyday use that you can guarantee you will always repay in full, then you may as well look for a card that gives you rewards of some kind - whether that be cashback, points of some description, whatever.

But the big caveat for anyone contemplating a credit card is - only do it if you can trust yourself not to spend more than you can really afford, and only if you will always repay in full every month without fail.

enthusiasticsaver

If you are  balance transferring it is always best not to make new purchases on the same card as you then run the risk of repayments going towards the interest free part of the balance. 

surreysaver

enthusiasticsaver said:

If you are  balance transferring it is always best not to make new purchases on the same card as you then run the risk of repayments going towards the interest free part of the balance. 

Payments *should* go towards the more expensive debt first, but this is dependant on the customer getting it right and not making payments until a statement is produced.
It's also likely that interest will be charged when mixing purchases and balance transfers, as most credit cards will charge interest when not paying off the full balance, even if some of that balance is at 0%