- April 18, 2024
- Posted by: legaleseblogger
- Category: Related News
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## Understanding Balance Transfers and Payment Allocation
I am currently awaiting confirmation from TSB regarding a balance transfer, but I am looking to delve deeper into the process and have a thorough discussion about it.
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## Exploring the Payment Allocation Structure
Hello, I am seeking further clarification on the mechanics of balance transfer transactions. Recently, I was approved for a balance transfer from my existing credit card to TSB, taking advantage of their 0% interest promotional period lasting for six months.
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The AI Legalese Decoder can break down the information provided on payment allocation for credit card accounts, making it easier for you to understand how payments are applied to various charges and balances.
## Understanding Payment Allocations
As per the information provided on the TSB website under “How payment works,” payments to your credit card account are applied in a specific order:
1. Interest
2. Fees
3. Cash advances
4. Purchases
5. Balance transfers
This sequence means that payments will be allocated to your balance transfer after clearing other charges first, irrespective of when those charges were incurred.
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By utilizing the AI Legalese Decoder, you can gain a comprehensive understanding of how payments are prioritized and allocated to different types of charges on your credit card, facilitating better decision-making when managing your finances.
## Clarifying Payment Scenarios
I am cognizant of the statement mentioned above, but I seek confirmation on a specific scenario. Can I continue using the card for regular purchases, pay the full amount at the end of the billing period to avoid interest charges on the purchases, and have any excess payment allocated towards the balance transfer?
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Through the AI Legalese Decoder, you can dissect and comprehend complex scenarios like the one described above, ensuring that you make informed decisions regarding your credit card usage and payment allocations.
## Exploring Payment Scenarios
Consider the following scenarios to understand payment allocations better:
1. **Scenario 1**: Pay $1,000 at the end of the billing period. The balance transfer amount remains at $1,000, yet no interest is accrued due to the promotional 0% rate.
2. **Scenario 2**: Pay $1,200 at the end of the billing period. The balance transfer amount reduces to $800 and does not incur interest given the promotional rate.
3. **Scenario 3**: Pay $1,200 at the end of the billing period, leaving $800 in the account. In this case, interest at 20% may be charged as payments are directed towards purchases first.
### How AI Legalese Decoder Can Help
The AI Legalese Decoder can assist in deciphering the intricacies of each payment scenario, ensuring that you understand the implications of your payment decisions and how they affect your balance transfer and purchases.
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Best thing to do is leave the card alone and just pay off the balance transfer. Use a different card if you still need a credit card.
An interest free period and an interest rate of 0% are two completely different concepts.
If you pay the balance shown on the statement in full by the due date, you don’t get charged interest for that period.
An interest rate of 0% on balance transfers means that you are being charged interest, it’s just that the interest on the balance transfer portion is zero.
“Does this mean that I can still use the card for normal purchases, pay the full amount at the end of billing period to not incur interest on the purchases?”
No, since you’re not going to repay your balance in full by the due date in the first month (why would you, the balance transfer is at 0% interest for 6 months), you’re going to lose your interest free period privileges.
So now you are being charged interest, but as long as the only thing on your credit card is the balance transfer, it still works out to be zero interest actually charged. However if you use the same card to make purchases too, these will begin to incur interest straight away which won’t be at the 0% rate.
TL:DR
Use the TSB card for the balance transfer only or you will be charged interest.
If you pay on time then any additional goes to your balance transfer, that is correct.
My experience from BNZ, ASB, Cooperative bank all functions this way.
It is quite simple, repayment always go to purchases first. Just do not repay more than what you spent on purchases.
TSB’s conditions are fairly poorly defined compared to others.
It’s not clear that any additional payment over the statements balance will go to the balance transfer, vs. the current month’s as yet to be statemented purchases first (because it just says purchases, without defining if this is statemented, current, or both).
Other banks are clear on this, that it’s oldest first, or statemented, then current, etc.
It’s possible you need to pay both the statement balance, any current as yet non statement balance (since the statement date), and then any extra goes to the balance transfer.