Balance Transfers on Credit Cards and Making New Transactions

KayDat on 16/05/2018 - 11:35
Last edited 16/05/2018 - 11:47 by 1 other user

I have a question about BTs and how financial institutions apply interest on new transactions. I have the Woolies CC w/ 0% BT and currently have the BT limit maxed out, minus a few months of min payments. I can certainly afford to pay it out in full, but I'm looking to take advantage of the full 0% interest period.

Now, benefits of the Woolies card is that the first weekend of each month you get 10% off your shop as long as you scan your rewards card and pay with the CC. Of course conventional wisdom states that you want to avoid putting any new transactions on a card you have only for BT.

I have heard that financial institutions now must apply repayments to balances with the highest interest first. If I put through any new charges on the card, that means repayments would be applied to the new charge first. I also know that as long as an outstanding balance is being carried on a credit card, you don't get any interest-free periods for purchases.

Is it possible then, to make a purchase on the card and then put a payment through immediately so that you don't pay any interest? If so, do you put the payment through on the day you make the purchase? Or the day that it clears your account? If you make a repayment on the card before the transaction clears, will the financial institution apply that repayment on your existing BT? Thoughts?

• 

  garetz on 16/05/2018 - 14:45

  -1

  All payments will go towards your BT, till its paid out, then payments goto newer transactions, so the rest of your questions dont really matter.

  • 

    donbot on 16/05/2018 - 15:07

    +7

    Incorrect. I've managed many BTs on credit cards, making payments (eg. to qualify for min spend to obtain xxx points), and had it work reasonably well in terms of payments going to the purchases rather than the BT. Its never 100% (you might pay a few dollars of interest), but should be offset by the benefit obtained (points, discount etc)

    The only way to know - read how they apply payments in the T&Cs of the card as each card can be different.

    Eg. HSBC applied payments to the BT until current purchases were issued on the monthly statement.

    1/1/18 - BT of $5000
    2/1/18 - Purchased $1000 of groceries @ woolies
    3/1/18 - Paid $1000 on to card
    26/1/18 - Statement issued.

    In the above example, they ignore the $1000 at woolies until they are on a statement. So they put the $1000 payment against the BT.

    But if you did it this way…

    1/1/18 - BT of $5000
    25/1/18 - Purchased $1000 of groceries @ woolies
    26/1/18 - Statement issued.
    27/1/18 - Paid $1000 on to card

    The $1000 would then be allocated against the $1000 of purchases. You would pay interest on the $1000 purchases for 2 days, hence moving its use closer to statement date.

    TL:DR - read the terms and conditions about how they allocate payment.

    • 

      KayDat on 16/05/2018 - 15:45

      Whelp, time to dig through the T&Cs tonight. Thanks

    • 

      dbui8743 on 16/05/2018 - 19:40

      This is pretty accurate

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  chumlee on 16/05/2018 - 15:03

  AFAIK banks can have their own payment hierarchy in place

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  Settero on 16/05/2018 - 15:10

  1 - no not possible to pay right after transaction and have it count to purchases

  2 - wait till clears or will be applied to BT

  3 - always goes to whats highest interest rate and a uncleared transaction does not have a interest rate as it may theoretically not clear.

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  bitesized on 16/05/2018 - 15:18

  Hi OP, I work in banking.

  The short answer is no - your solution would not work. In fact, you already mentioned it in the line "I also know that as long as an outstanding balance is being carried on a credit card, you don't get any interest-free periods for purchases."

  The part you misunderstand is that for a credit card, an outstanding balance includes any balance transfers. So, you will lose your interest free eligibility on current and future purchases unless you pay off the closing balance by statement date. You would have to pay off the purchase + BT balance to avoid purchase interest.

  Hope this helps.

  • 

    KayDat on 16/05/2018 - 15:46

    Yeah I get that. I guess what I should say is, would it be possible to minimise interest paid on purchases while taking advantage of the benefits.

    • 

      kevmev12 on 16/05/2018 - 18:03

      Wouldn't that just depend on whether the 10% savings you get from your first weekend of the month spend at Woolies is greater than the interest you would incur?

      Personally I would just put that BT credit card away and use another card; way too much mental arithmetic and effort for very little return (if any).

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  endolphin on 17/05/2018 - 21:15

  I've got another example. I took advantage of a new Virgin cc offer for 6 months BT 0% AND 14 months 0% on purchases.

  So in January, I cleared all other cc balances and BT to the Virgin card (10k). Due in July 2018. Since January I have also spent about $2k on purchases. Technically due March 2019.

  I have made a few minimum payments, say $1k total. So what do I pay in July to avoid any interest charges?

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  MathNerd on 19/05/2018 - 23:09

  +1

  Here's something that should help, OP.

  You're concerned about incurring interest charges because you want to use the WW CC for this weekend's 10% off shop, right? I thought the same too, because that's how they explain the way the 10% discount works.

  However, they can't force you to use the WW CC to pay your grocery bill, because if you used PayPass/PayWave, it must show the correct amount on the terminal, it can't change that once the terminal realises you've got a WW CC. It'll wreck havoc.

  Instead, what WW do is flag your WWR number on their system, as you being a WW CC holder. That's why step 1 of the 10% discount weekend deal is to scan the barcode at the back of your WW CC - this is just your WWR barcode.

  Therefore, simply scan your WWR barcode (any one is fine), the 10% should apply at the payment stage and you're good to go! Even better, pay using 5% off WISH eGift cards!

  Hope this helps.

  • 

    KayDat on 19/05/2018 - 23:11

    Hmm. Do they know if you bought a gift card from your transaction? I just assumed the 10% would come as a cashback like amex

    • 

      MathNerd on 19/05/2018 - 23:24

      Yeah, they would've closed the gift card purchase loophole a while back, I can't see them dishing out 10% discounts on gift cards willy nilly!
      No cashback, it's straight up 10% discount.
      What were you planning to purchase?

      Edit: Here's some first hand info from a fellow OzBargainer.

      • 

        KayDat on 20/05/2018 - 00:12

        Fantastic, thanks for the link.

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  justwii on 02/11/2018 - 18:50

  -2

  Sorry, to reply to an old post, but it seems no one has answered this correctly.

  Here is how you avoid being charged ANY interest at all when using a BTed CC:

  At anytime you want to buy something with the CC, find an ATM of your CC bank that accepts deposit, deposit $X into your CC, where x is the amount you are going to spend.
  Go buy your stuff.
  DO NOT overspend.

  The way this works is because the deposit amount in your CC is not "credit" anymore, it is "debit". So you are only using your extra money saved in your BTed CC. And since you are in fact buying stuff with your CC, so you will meet the money spending requirement for any points you are going to get.

  Hope this helps.