"Hidden discretely in
Balance Transfer Offers was
an Order of
Payments in the fine print of the terms and conditions that specified which balance(s)
the Credit Card Issuer of a Balance
Transfer Credit Card would apply payments by the
Credit Cardholder to firstly. In nearly all cases payments
by the 'Acceptor' of a Balance Transfer
Credit Card were
applied to the lowest interest rate balances
first, namely the monies in the Zero
Balance Transfer for 24 months and the highest interest rate, namely
the recent payment for recent Purchases, last. Any payments by the
Credit Cardholder were applied firstly to the
Balance Transfer amount under a 'Teaser Interest Rate', whereupon any
Purchases or
Cash Advances were deemed unpaid and
incurred interest at the specified interest rates from the date of each
Purchase or
Cash Advance. Hence, if you had a Balance
Transfer amount, and you used the Balance
Transfer Credit Card, you did not enjoy an
Interest Free Period
(referred to as a
Grace Period in the USA) and you
supposed 24 months Zero Interest Rate on your Balance Transfer Amount was
eroded.
Below is an extract
from the Woolworths Everyday Money MasterCard Credit Card pre 1 July 2012:
(2) The interest rate of 5.99% will apply for the first 6 months of your balance
transfers from non HSBC/Woolworths credit or store cards. After this period, any
balance outstanding from the balance your transfer will accrue interest at the
Cash Advance Interest Rate applicable at the time (currently 21.34%p.a). HSBC may
allocate payments we receive from you to pay the total amount owing in any order
we see fit, including applying any or all payments made to your Woolworths
credit card account, to reduce the balance(s) transferred first and then any
subsequent purchases.
The Guardian article "Interest-free credit
card trap snaring unwitting borrowers" - 25 March
2012 notes, 'inter
alia' that:.
"Brian Cole, of Capital One in the UK, the bank that first introduced
zero-interest balance transfers to Britain in the 90s, says: "There's a lot
of practice in the [banking] marketplace that is shameful, and credit card
companies are not immune. [Balance transfer] customers think they're going
to progress in getting out of debt, and get some relief from interest
payments. But make a mistake and you will end up making money for your
credit card company."
Alas some
Credit Card Issuers devised new
methods to exploit Australian Credit Cardholders s with poor
Financial Literacy as
exampled in Labyrinth of ‘Concealed Spiders’:
(A) Example
3 highlights that some Credit Card Issuers
of Balance Transfer Credit Cards
have since
introduced, but not overtly publicised to prospective new customers, that an
Interest Free Period
will not apply on Purchases
until after the Balance Transfer amount is repaid in full and the
Credit Cardholder
has repaid its Total Amount Owing, including its Balance Transfer
amount.
(B) Example
4 highlights that on
some of the
Balance Transfer Interest-Free Period Offers, should the
Credit Cardholder
make a Purchase/s
and not repay their Balance Transfer amount and any Purchase/s
by the Payment Due Date, s/he
will not only be charged interest on the aggregate of their
Purchases
and the Balance
Transfer amount, but also forego their Interest Free Period
for the subsequent two months.
(C) Some
Credit Card Issuers
of Balance Transfer Credit Cards provide a Calculator for prospective new customers to determine how much interest
they could
save during the
'Teaser Interest Rate' (sometimes 0%) for an 'Introductory Period' (from 3
months to 24 months). Hidden in the fine print is An
assumptions that this calculator makes is that
"You don’t make any purchases on your card until
the promotional period ends or the balance
transfer is paid in full." See
Calculate how much interest you could save!"