“Interest Free” Credit Cards

Over the last few months I’ve been shuffling a bit of credit card debt around in order to avoid paying interest on it. If you’ve ever tried this, then you’ll know the first rule of credit card shuffling. It’s “never buy anything else with a card that has an interest free balance on it”. The reason for this is the way that credit card companies allocate the money that you give them. They use it to pay off your interest free balance. Only once that balance has been fully paid off do they pay off any other charges on the card. So if you use the card to buy other stuff, then you can’t pay off those purchases until you’ve paid off the interest free balance. And all the time you’re racking up more interest on those purchases.

I’ve had a credit card with Egg for some time. Now most credit card companies use interest free balance transfers to entice new customers to join them. So it was nice to hear that Egg offered interest free transfers to existing customers. Any balances transfered to your Egg card during the anniversary month of your joining Egg are interest free for five (or is it six?) months. My anniversary month was May, so I cleared the card and in May I transfered a balance onto it.

The first surprise came when I checked my account later and found an extra “balance transfer fee” listed on the statement. Of course this was mentioned in the small print and it’s my fault for not seeing it, but I can’t help thinking that it would have been polite if at some point during the transfer process it had said “there will be a transfer fee of £xxx – do you wish to proceed?”

But that was only the start. Earlier this week I got my June statement. And was surprised to see a small amount of interest had been added. I contacted Egg to ask why and they told me that the transfer fee didn’t form part of the balance transfer and therefore wasn’t interest free.

Remember the first rule of credit card shuffling from above. It seems that Egg’s interest free balance transfer comes with its own built-in “extra purchase”. There’s no way that I can pay off the transfer fee without paying off all of the transfered balance first. It’s a classic catch 22 situation. Either I pay them the interest or I pay off the transfered balance – thereby losing the advantage of having an interest free balance transfer.

I should point out that the amount of interest is tiny. Over the interest free period it will amount to less that £10. But that works both ways. Lots of people that take up this offer will be confused by having to pay interest on an “interest free” balance transfer. And Egg will have to take the time to explain to them where the interest charges are coming from. And many people will, like me, feel vaguely cheated by the explaination. Is that extra £10 really worth enough to Egg to counterbalance the bad service they are giving their customers. I’m not really minded to give them much more of my business in the future. I’m sure other customers will feel the same.

If they had just included the transfer fee in the interest free balance then the offer would have worked as customers expect and no-one would have complained. But no, they’d rather have the tenner and a few pissed off customers.

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  1. The problem I have with saying you’ll take your business elsewhere, is that they are all really as bad as each other. It gives you a bit of personal satisfaction, but you get all the extra hassle that changing banks/credit cards etc entails.I have a mental picture of a few thousand people doing this each month, but from and to every bank, with each bank having no significant net gain/loss in numbers.Ditto mobile phone operators, electricity/gas companies, broadband ISPs.

  2. Egg are a bunch of idiots. I had a savings account with them, but I switched when I saw that they were offering better interest rates to new customers than they were giving to me.

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