A British Man's Take on Debt, Saving & Investing

Beware The Balance Transfer Cheque

Posted on September 11, 2009 by Lee

The postman dropped the usual rainforest through the door this morning and after sorting the wheat from the chaff, I was left with my LoveFilm DVD delivery, my PC Pro subscription, a Vision Express money-off voucher and something from Barclaycard.

It’s a bit early for my credit card statement, so I ripped it open wondering what they wanted. Within was a letter and attached, 2 cheques.

The Offer

“Hello Mr Five Pence Piece,

Your Barclaycard is ideal when you need to buy something. We can also help you manage your finances with a 0% balance transfer offer (a 2.5% handling fee applies). Moving balances from your other cards to your Barclaycard could reduce the interest you pay and make managing your money easier.”

Sounds pretty good so far, doesn’t it? No hard sell, and they’re offering to save me money.

“Here’s how it works.

0% interest until March 2010 (a 2.5% handling fee applies). […] Any outstanding balance after your March 2010 statement will go back to your standard purchase rate of 12.9% p.a.”

Where’s The Catch?

Still struggling to see the catch? Well, based on what is written in the letter and copied above, there isn’t one. Transfer a balance, pay no interest on it until March 2010 for just a 2.5% one off fee. If you manage to pay it off before or by March, then it’s 0%. Have a little bit left after that, they’ll charge you your standard purchasing rate on the remaining balance.

That really could save you money off of other cards, so what’s the problem?

Check the Small Print

Flipping over the letter to the small print on the back, my eyes fell on the ‘Allocation of Payments’ section. Here it is:

Payments you make are applied in the following order:

  • Default Charges and interest on Default Charges
  • Promotional Balances (if you have more than one promotional balance your transferred balances are paid before promotional purchases, then open ended offers first, then lowest rate first, then oldest offer before newer)
  • Interest and other charges
  • Standard balance
  • Cash balance and Barclaycard cheques (unless there is a promotional rate).

Confused? Don’t worry; that’s the idea.

Picture the Scene

I’m going to use Selina again, my imaginary friend from the Dig Yourself Out of Debt series. I’m sure she won’t mind too much.  As we know, she has 2 credit cards; One has a £5,000 balance at 14.9%, and another with a £1,000 balance at 24.9%.

Her new Barclaycard for which she’s just received these cheques didn’t have a promotional rate to begin with, but she had been using it on and off to buy stuff she needs when she runs out of cash towards the end of the month before learning how to be more sensible and start digging herself out.

The purchase rate on her Barclaycard is 6.9% (non-promotional) so carrying a balance wasn’t that big of a deal to her, and her balance currently stands at a not too terrible £500. The minimum payment is just £10 and each month it costs her around £2.50 in interest.

A little knowledge is a dangerous thing. She’s just caught the money saving bug, so decides she’d be far better off by transferring her expensive £1,000 balance (at 24.9%) onto her Barclaycard, and paying it off before March 2010. She writes the cheque, and puts it in the post.

Job done. It cost her £25 to transfer her £1,000 balance (remember that 2.5% ‘handling fee’?) but she is saving £20 every month in interest fees from the old card.

So far, so good.

It’s Behind You!

Seen where this is going yet? Selina rumbles along paying off amounts she can afford each month. Sometimes more than the minimum, but never the maximum amount as she cannot afford anywhere near that. She feels good knowing that she is spending out less money than she was, even if it takes here longer than March 2010 to pay it all off.

But is she really?

The minimum payment hovers around the £70 mark. Sometimes she pays up the minimum, sometimes she stretches that to £100. Here’s the problem: From the list of the way payments are applied above, Selina is currently paying off her balance transfer. This might well be at 0%, but she is still accruing interest on her ‘old’ £500 balance from purchases, and will continue until she pays off every last penny of the balance transfer!

I’m still wondering if a balance transfer cheque (if not paid off in full by the time the promotional rate expires) reverts to the “Cash balance and Barclaycard cheques” section of payment allocation. If they do, then they’ll sting you for even more interest while you then pay off your standard balance – it’s not terribly clear (and isn’t that just the point).

Imagine how much worse this would be if she’d taken a cash advance before doing the transfer. With it’s 3% fee and 28.9% interest rate, she’d accrue interest on that as well as her old £500 balance month in, month out. The only way she could stop paying interest is to stump up £1,500 in one go and pay off the card in full.

Credit Card Companies Are Not Your Friend

Despite the friendly wording of their letters (if you’ve not been naughty at least), they are not your friends. They are businesses, and businesses are out there to do one thing: make lots and lots of profit for themselves and their shareholders.

I may appear to be picking on Barclaycard but rest assured all credit card companies are the same. It’s just they’re the first this year to have sent me any so were timely cannon-fodder.

So what did I do?

Putting Selina back in her room – after all the cheques were mine not hers in reality – what did I do with them? I already have a promotional balance transfer on my card, and no purchases. I don’t have another credit card with a balance that isn’t paid in full every month, so I put them in the shredder.

To truly and safely benefit from this 0% deal, my Barclaycard would have to have a balance of £0.00.

To stay safe and get the most out of your credit card, stick to one promotion at a time, and don’t mix when it comes to purchases and balance transfers. If you have a card you got for a balance transfer, do not spend on it. Do not draw cash out on it. Freeze it in a block of ice and keep it in the freezer if you don’t trust yourself.

One thing is for sure – mixing standard and promotional rates will quickly make you poor and that’s what they want. The more you’re a slave to credit, the more profit they make.

Don’t fall for it.


Frugal Friday! Batch Cooking

Posted on September 11, 2009 by Lee

One of the ways I enjoy saving money (for paying off debt quicker, of course) is to batch cook. The average UK household – if the people I watch in Tesco are anything to go by – seems to live on prepacked microwave meals, pizza and takeaways.

If you enjoy cooking though there’s a much cheaper alternative.

Cooking in Batch

This sounds complicated but is actually really easy to do. All it involves is cooking more than you plan to eat right now, portioning out the remainder and either putting it in the fridge, freezing it, or a combination of the two. Batch cook several meals over the course of a week and before you know it you have a fab selection of home made food in the freezer that can be taken out at a moment’s notice and popped in the microwave.

Good steaming hot home made food in 5 minutes flat. Because it’s frozen you can even take it to work for lunch providing you have a microwave available.

A Quick Example

I love Chinese takeaway, but I really dislike paying for it. So as I was going out anyway, I combined journeys and diverted to Tesco before coming home. Scouring the reduced areas (I was going to cook when I got home), I managed to pick up:

  • A family-sized packet of ready cut Chinese vegetables (70p down from £1.50),
  • 2 cooked meat-counter hot & spicy sausages (50p down from £1.85),
  • A bag of fresh egg noodles expiring today (20p down from £1),
  • 3 giant red onions (30p down from £1.05),
  • 3 giant mild red chillies (20p down from £1),
  • A clove of garlic (full price at 30p),
  • A packet of sweet sticky chilli stir-fry sauce (full price at £1)


I already had the olive oil to fry off of the onion so that was done first. After softening and turning a nice golden brown, I sprinkled some sugar in to caramelise, and then added the giant packet of vegetables. After gently frying it down for about 10 minutes I added the sauce, chillies and noodles. Mixed well, and divided equally into some snap-shut plastic containers – the ones your Chinese delivery normally arrives in!

Tip: Save these plastic containers – they fit together to take up next to no space anyway and are great for doing this with. Wash them out, and store dry. They are reusable, microwave and dishwasher safe.

Calculate The Saving

After cooking and portioning out, I’d managed to feed myself for lunch yesterday, and I also made up 5 containers for freezing.

If I’d not purchased the discounted items, then the total meal cost would have come to £7.70 which made each meal £1.28. This is still very cheap for a Chinese meal, but being frugal, I am not ashamed to shop in the knock-down sections first. The total cost of the items I bought was £3.20 making each portion just 53p – over two and a half times cheaper!

Now the kicker: I always shop in Tesco, and where possible, get my fuel there as well. The end result is lots of Tesco ClubCard points and vouchers. I actually cashed in a £2 voucher for  this shop, so I only really spent £1.20, making each dish just 20p.

Need Inspiration?

There’s no shortage of recipe repositories online, but if you want ones with frugal wholesome living in mind, check out this amazing list of ideas from the dedicated people over at the MSE forums.

If you find yourself using the excuse “I don’t have the time / energy to cook” when you get home from work, then batch cooking is a great way not to just save money but keep your pennies to yourself and save yourself time later on in the week as well.

Have you tried batch cooking before?


p.s. Frugal Friday is published every Friday and includes a frugal tip for money saving. To see every Frugal Friday post, click ‘Frugal Friday’ under Categories to the right.

Bank of England Holds Base Rate at 0.5%

Posted on September 10, 2009 by Lee

The Bank of England has announced this afternoon that the base rate will remain unchanged at 0.5%, widely following market predictions. This is good for those with certain kinds of debt (such as SVR tracker mortgage holders and student loans), but will continue to have negative impact on saving rates and virtually no impact on other borrowing such as loans and credit/store cards.

I’m still formulating an opinion on the latest rate announcement. I think it is deserving of its own post in a few days when I have got some figures worked out.


Blog Widget by LinkWithin
Page 40 of 48« First...4041...Last »
savings accounts

  • Meta

↑ Top