Barclaycard 0% Interest Rate Scam

I have just been caught out by a Barclaycard 0% interest rate scam. The amount involved so far is

Interest On My Barclaycard Account

quite small. Just £2.71 on my June statement. But regardless of the small size, the interest charge is extremely annoying. I religiously pay off my credit card balances by the due date, so any interest charge is an aberration in my book.

The Barclaycard 0% Balance Transfer

On 7th May I took up a 0% balance transfer offer. In my case for £850. The balance transfer fee was 3.9%, amounting to £33.15. However, the offer appeared to represent good value as the interest on the balance was 0% until 1st February 2016 - effectively an APR of 2% over 21 months. So far so good.

The problem comes when I go to pay my May Barclaycard statement. The balance amounted to a total of £1,019.26. That is £883.15 of 0% balance transfer plus £136.11 of purchases. I decide to pay the £136.11, plus the £33.15 in balance transfer fees. In addition I paid a further £20.38 by direct debit. All payments being received by Barclaycard before the due date.

In essence, I had cleared my purchases, cleared the balance transfer fee and paid £20.38 towards the 0% interest free balance.

My June Credit Card Statement

Today, I received my June statement. To my surprise it shows an interest charge. Only £2.71. But this £2.71 relates to a charge of 1.313% against some balance of mine. For the accountants and mathematicians amongst you 1.313% monthly interest amounts to 17% annually. £2.71 divided by 1.313% interest equals £206.40. The non 0% element of the statement was only £169.26, even if I take the balance transfer fee into account. How had Barclaycard arrived at £2.71 interest? As I had more than cleared the balance of interest bearing charges before the due date I immediately contacted Barclaycard. Getting through by phone was very difficult. So I messaged them requesting from them an explanation as to why I had been charged interest. This is what I received from Barclaycard's customer services:

 In reply to your enquiry, I would like to state that the on your recent statement we applied interest charges on the purchase balance and I can confirm that if you use your Barclaycard for purchases or cash withdrawals ? you'll be charged interest up to the point you make your payment, even if you pay off those purchases at the next statement.

Avoiding Interest on a 0% Interest Free Barclaycard Balance Transfer

Apart from anger at the glibness of Barclaycard's message the penny dropped. The 0% interest free balance transfer is a scam. In essence, once you accept the 0% balance transfer, everything else on your Barclaycard will be charged interest from the transaction date. Even if you confine yourself to purchases and you clear your complete balance of new purchases each month. As you can see from my statement above, my monthly expenditure is greater than the balance transfer. So in order to gain 2% APR interest on £850 I would be paying 17% APR on £1,866.70 of purchases plus £2.71 of interest. A rough calculation gives a monthly interest charge of £24.55, even if I pay off my complete balance of new purchases and the previous month's interest. This far outweighs any benefit from having the original £850 interest free balance transfer. 

Based on Barclaycard's rules the only way to avoid interest charges on purchases, and interest charges on the previous month's interest charge, is to pay your statement on date of issue and then pay Barclaycard for each of your new purchases on the day you make them. Alternatively, you could maintain a permanent credit balance greater than your expenditure. That way you will not have an over night outstanding balance. But effectively you are using your credit card as a debit card. I have suggested this to Barclaycard and I am awaiting their views.

In conclusion. In my opinion Barclaycard's 0% interest balance is effectively a scam. It will cost you far more than you will ever save. And joins the growing list of financial products that any sensible consumer should avoid.

The Pound Euro rate Finally Hits 1.24

The UK pound finally went through the 1.24 Euro barrier today.

The £ Up to 1.241 Euros - A gain on almost 5.6% in 12 months

The latest UK employment data, that showed unemployment falling to 6.6% in May, took the £ over the 1.24 level. I predicted the increase in the £'s value last week, in response to Mario Draghi's actions to stimulate the Eurozone economy.

This makes travelling across most of Europe much cheaper than a year ago. The Euro area inflation rate is less than 1%. Meaning, in real terms, actual sterling costs for an average purchase will be almost 5% lower.
On a personal basis, this is extremely good news. I have arranged to pay for my holiday accommodation in the South of France in Euros.