Interest on “Interest-Free” balance transfers?

Credit Card
Credit Card (Photo credit: 401K 2012)

Watch out for this one…

I took out an Amazon credit card via MBNA some months ago. They offered an interest-free balance transfer (subject to the usual small fee) which I made use of. In addition, they run a points system which builds up towards Amazon vouchers based on the amount you spend.

All fine and hunky-dory.

However, I noticed that I was being charged a small amount of interest each month despite paying off all purchases I made on the card as soon as I made them. Three pounds one month, £1.23 the next… that kind of thing.

I rang and the chap on the phone apologised, said he couldn’t work out why this was happening and refunded the money.

Over the next three months, it continued so I rang again. Once more, I checked my purchase/payment procedure with them, clarified the position as regards the outstanding transferred balance, the chap apologised, refunded and all was fine.

Surprise. Three months on and I had another three charges on there – £1.00, £1.21 and £1.00. I’ve just called them *again* to sort it, but this time I’ve been informed differently.

Because I’m making purchases, I have to clear the *entire balance* each month – not just the purchases – otherwise I incur interest. This seems to be the case even if I buy something then immediately go online and make a debit card payment onto the card before it’s appeared on any statement.

However, if I don’t use the card – which is where MBNA make their money! – then I don’t incur interest. This doesn’t make sense to me, as it’s using the card for purchases which nets the issuer a fee from the retailer. With the current scheme they’re encouraging me *not* to use the thing!

In addition, the card promises “up to 50-ish” (sorry, can’t recall the actual amount) of days interest-free on purchases. This obviously isn’t the case as I’m being charged interest on purchases which I’m paying off – at the most – a couple of days after I make them.

Obviously, the solution is to pay off the entire transferred balance first and then start using the card as normal but that’s just not how it was sold to me, nor explained by the first two people on the phone.

At least I know where the charges have been coming from at last, and they have all been refunded to date – though I’m aware there will be *another* pound on next month’s that I’ll have to ring up and contest.

So keep your eyes open, folks, and check those statements!

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This is actually a general one, though I had the issue with Nationwide this morning. It’s all in the T’s and C’s of just about every credit card I’ve had, though. I just forgot about it.

When I was in Japan I had to take a cash advance on my Nationwide credit card. Normally I just use my debit/bank card in the ATMs but for some reason the one in the 7-Eleven near my hostel just wouldn’t accept it despite it having worked two days previously in the airport. Fortunately the same machine accepted my credit card. I knew I’d get hit for the cash advance fee, but I didn’t have much choice.

What I didn’t realise was that interest is accrued on these withdrawals/advances from the moment the cash is in your hand until the time you pay it off. This means that if you withdraw cash two days after you’ve just paid your monthly credit card bill you’ll be hit for 28 days’ interest on the next one.

The way round it is to get to the bank or pop online and use your internet banking. As soon as you can after the withdrawal, make a manual payment onto your credit card.

As it happened, I’d have been really stiffed if I’d not noticed the interest on my statement online. I’d had a large refund come through before the withdrawal which paid off my previous balance. As such, no direct debit dropped out of my bank account this month and so nothing was paid off towards the cash advance (which, I believe, takes “priority” over purchase debts on the card which is at least one bit of fairness in the whole thing).

As a rule, I never use cash advances if I can avoid it. I’d recommend sticking to the same principle. But if you have to, as I did, the simple rule is to pay it off as soon as you can.

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