Query re: allocation of payments to a credit card

Shenaid89 · 14 January 2019 at 10:03PM

Hi there.

I need some advice.

I took out a Tesco Bank credit card in 2017 on a 0% balance transfer for 2 years offer.

I balance transferred £6500 to the card straight away in 2017. I have been paying this off monthly since then and on the 1 January 2019 I made a purchase for £6374 for a holiday, and £1300 was still left on the card from the balance transfer.

I paid the amount of £6374 back to the card to cover the cost of the purchase in full on 10 January 2019 (9 days after the payment was made).

Today I received a statement from Tesco saying I owe them £1300 in purchases which has generated an interest payment of £20 and a likely further interest payment next month unless I pay the £1300!

My understanding is that this money should have gone on paying off that purchase meaning no interest should have been charged.

Tesco Bank have told me that this money has actually been used to pay the remaining £1300 of my 0% balance transfer leaving a purchase amount of £1,300 left on the card which I am now being charged interest for.

I am sure this is in breach of the 2011 rules which states payments made must be used to first pay off amounts attracting the highest amount of interest? Tesco actually state this on their website and on the terms and conditions of the card.

I am getting nowhere with Tesco Bank customer services and want to check my understanding is correct so any advice is greatly received.

Thanks,

Emily_Joy · 15 January 2019 at 8:47AM

This is the reason not to use balance transfer cards for purchases. Purchases don't attract any interest as long as the entire balance is paid off in full. You haven't paid the balance in full, so you are being charged interest on the entire balance. So they calculated three day interest as (1300+6374)/365*(your interest rate)*3.

msallen · 15 January 2019 at 8:50AM

You don't mention statement date, but it looks very much like you paid the £6374 before it appeared on your monthly statement.

Payments are allocated to statemented balances first, so as the £1300 had appeared on your most recent statement, the first £1300 of your payment went towards clearing that.

If you're going to quote T&Cs then you should understand them first.

molerat · 15 January 2019 at 9:09AM

From 2.1 of Tesco T&Cs

We always use your payments to pay off items which have appeared on a statement you have received before paying off items which haven't yet appeared on your statement.

.....................................

chattychappy · 15 January 2019 at 9:53AM

Yes, unfortunately because the purchase wasn't statemented, your payment knocked down the BT balance. Your purchase will still be accruing interest.

If you have to put a purchase onto a BT card, the best you can do is to attempt to put the purchase through just before a statement date and then pay as soon as afterwards after the statement date.

This is pretty much the way all cards work, though in my view it probably does break the spirit of the 2011 review. CCs would argue that the main injustice of higher rate balances being "grandfathered" for months or years has been addressed and that applying payments first to unstatemented balances would create all sorts of other anomalies.

Emily_Joy wrote: »

This is the reason not to use balance transfer cards for purchases. Purchases don't attract any interest as long as the entire balance is paid off in full. You haven't paid the balance in full, so you are being charged interest on the entire balance. So they calculated three day interest as (1300+6374)/365*(your interest rate)*3.

Not quite. Interest is indeed applied to the entire balance, but at the applicable rate. The BT rate is 0%. So the OP will only pay interest on the purchase. The problem is that he/she will go on paying interest until it the purchase is cleared - and the payment sent was first applied to the BT balance.

Shenaid89 · 15 January 2019 at 10:29PM

Thanks. This is very helpful. I certainly think that what they’re doing is against the spirit of the 2011 judgement.

In any case, after a lengthy discussion they have agreed to apply a 0% rate to the remaining purchase balance, essentially putting it back to how it was before the purchase, meaning no interest payable.

Query re: allocation of payments to a credit card

Comments

Categories

Get our FREE Weekly email full of deals & guides - and it’s spam-free