It has been a long time – particularly in blogland – since my last post. To the small but dedicated readership I had built up in the couple of months I was posting in the beginning, I offer my humble apologies for my abrupt disappearance. In mitigation, I had a lot going on in my life, and there just wasn’t enough mental powe left to blog as well.

But now things are coming back to a sense of normality, and I am extremely pleased to be able to share this with you all.

My job is safe

At least, as safe as it can be in the current economic climate. I am not ashamed to have made the preparations I did, as I think they provided an amazing insight into how a financial disaster can be handled, even when it seems hopeless to even try. I’ve even had a small pay rise since my last post, courtesy of a 3 year pay deal agreed before the credit crunch hit.

I am debt free*

On the 19th November 2009, I sent in the last debt payments to my remaining two creditors. £7,858.63 to Barclays Bank for the consolidation loan I had taken out to combine the debts left to me by my ex-wife, and a whopping 11p to my credit card provider BarclayCard.

This settled the loan 2 years early, and cost me £80 to pay it off, than if I had just let it run. But it was worth it.

*I am now using the credit card again, but sensibly. It is paid off in full every month, and as it is a cashback credit card, I now put all my spending on it. That way I technically get a 1% discount on everything I buy! I have no debt that I cannot repay instantly if required with cash savings.

I am divorced*

The judge stamped my Decree Nisi and the Financial Consent Order I applied for at the beginning of January 2010. This means that I’m all but divorced now. The Decree Absolute (the final part of the divorce procedure in the UK) was due to be signed by the judge last week. This will hopefully bring to a close a very bitter and expensive part of my life.

*I am waiting for my solicitor to forward the Absolute to me. Until I have it in my hand, I won’t actually believe it is over! I still need to pay my solicitor for his work, and the bill should be arriving some time this month. I can’t say I’m particularly looking forward to it.

I have found new love

It’s funny how life works. I was on a residential training course for 16 alternate weekends as part of my profession. After 3 or 4 weekends, I was finding myself drawn to a particular girl who was also on the course. We got on so well, liked the same things, laughed at the same things and loved spending time together when we had finished for the day.

Towards the end of the course we acknowledged that we were ‘in a relationship’ (thank you Facebook for making the lines so clear cut!), and we’ve been spending a lot of time with each other ever since. Each of us has done the ‘meet the parents and family’, We’re going on holiday together in July, and we are looking for places to move into together eventually. Although she still lives at home with her mother, her mother is happy for me to stay, and so I have done just that countless times since January.

Some people were concerned the age gap would be our undoing (I’m 26, she’s 19), but there is no sign of it being an issue, and long may that continue.

I have savings

Being single is considerably cheaper. Being in a new relationship has put pressure on my preset targets for 2010/11, but can you put a price on happiness? I don’t think you can. I am saving at a minimum 50% of my income each month still, and sometimes way in excess of that, but doing things as a couple (dinners out, clothes shopping etc) isn’t something I’d budgeted for when I originally wrote my plan!

All said though, I’d rather be happy than rich. I am debt free, I am all but divorced, my life plan will happen (just a few months delayed thanks to extra expenditure), I am blogging again, and I am 110% in love with someone very, very special.

Life doesn’t get much better than that. I love you Catherine.

• Patience is a Virtue
• Dig Yourself Out of Debt: Avalanches and Snowflakes
• Is Debt Worth It? Does It Matter?
• A Fundamental Question
• The Credit Crunch Has Positives

Today is a feel good day. The last remaining credit card I have with a balance has been set to “pay in full” as of next month.

Come the 9th November I will be credit card debt free!

The little checkbox on my online account will never again move from the “pay in full” position it is now sitting at.

I vow, here and now, to myself and the millions upon millions of people who have Internet access, I will never ever ever pay another penny in credit card interest.

Ever.

Thank you Barclaycard for the balance transfer you gave me in January, and I am sorry I didn’t fall for more than one of your entrapment methods along the way. When I took out the card in January I was duped into purchasing Card Protection that basically covers fraud, loss, holiday cash advances if you get stuck and so on. Live and learn.

I didn’t fall for your 0% interest on purchases that only lasted for the first 3 months. I didn’t fall for your balance transfer cheques you sent me (twice!). I didn’t fall for the 0% ‘deal’ you offered me at month 6 for 0% on just one month of purchases (that would have cost me a fortune unless I had paid off the entire balance afterward – nuking the 0% transfer in the process).

Nice try, but you will have to be content with the £8 of interest you have earned from me. It is the only interest you will ever earn from me, so do not spend it all at once. Can I suggest you put it into a savings account?

Compound interest is your friend!

• A Formal Complaint to my Bank
• Beware The Balance Transfer Cheque
• Savings Roundup - September 2009
• MBNA Launch Best Credit Card Balance Transfer Deal Ever
• 5 Things I Will Do When Debt Free

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.

• Personal Recessions
• The Importance of Redundancy Planning
• Dig Yourself Out of Debt: Cleaning Up
• A Formal Complaint to my Bank
• Dig Yourself Out of Debt: Know What You Owe