19 Jul 2013, 12:30pm
debt personal finance rant
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  • When is 0% not 0% and £5 not £5 – when you ask Tesco Bank, that’s when

    With a thump on the doormat a new missive come from Tesco Bank who are  feeling in a jolly  mood, inviting the ermine to give himself some breathing space from the crushing weight of consumer debt, with a kind offer of taking it off my hands at 0% interest. Presumably their impecunious customers are supposed to read “0% – that’s FREE OF CHARGE”. I regularly get this kind of offer from all sorts, but without shedloads of consumer debts it’s hard to avail myself of the pleasure. This one, however, came with an added wrinkle which was new to me. Usual puffy piece, enjoy some breathing space

    breathing space from Tesco

    Ta-Da! Tesco Bank – you win the lying sack of shit award of the week as I turn the page

    IMG_9155

    So I pay no interest, but the usual scam of a ‘handling fee’. Presumably it’s to feed the hamster that runs the wheel to keep the supercomputers running in Tesco Towers. Or to pay the grunt to lick the stamp – no, that can’t be it as it’s a typical 21st century financial proposition that won’t involve any humans at all. Except for you, the willing consumer, who is the Debt Slave to be bound by the system. At least Asimov’s robots had the Positronic laws but Tesco clearly feels that sort of thing is effete and robotic computer shafting of their customers is A Good Thing.

    In my book if it costs me 2.99% (min £5) to borrow £10,000 for a year then that’s an APR of about 3%, simples dear Tesco Bank. One of these days I may rouse myself to grouse to the Advertising Standards Authority about the fact that 0% isn’t 0% when it’s really about 3%, but I observe the new wrinkle, that the fee is charged as a purchase and what’s more that will be charged interest at the purchase rate. Just so you don’t get suckered by oh it’s only £5, I’ll save you fishing the calculator out – unless you’re borrowing £125 or less that hamster is going to be demanding more than a fiver for the privilege of ‘handling’ your 0%! Interest-free! loan. Life’s a bitch at times, innit?

    2.99%? 3.5%? What’s a mere crafty 0.6% interest rate uplift between friends, eh?

    Say I borrow £10,000 that way, and pay £299 for the privilege. Which is obviously not 0% of £10,000, unless something has changed since I went to school. However, feeding the data into the munge-a-tron that is Excel, and assuming the purchase interest rate is about 16.9% p.a. which seems to be the going purchase rate at the moment in Tescoland  it appears that after 12 months of this game, I owe £353. Which is a tad in excess of 0% to £10,000, to the tune of about £353 🙁

    So that 2.99% is actually 3.5%, which is what got Tesco the Liars of the Week award. In fact that means that at Tesco Bank 0% interest is really 3.5% interest, so on your bike, peeps.
    It’s deceitful, underhand, and just downright wrong. Way back in 1989 when I borrowed some of the deposit for my house from those nice people at MBNA on interest-free credit interest-free actually meant interest free, and these were the days of 7% interest rates. Somewhere along the line in the intervening years we seem to have accepted that 0% doesn’t mean 0% when it comes to credit cards. I was under the impression that credit card firms had to put your payments ot the dearest part of the loan first these days, in which case overpaying the first payment by about £309 would save me £40 of that purchase interest rate if I were to borrow £10309 right off the bat (and pay the excess £309 back ASAP). Con-artists… In the meantime, if anybody feels the need to avail themselves of interest-free credit that isn’t interest-free, then remember the solution to this chicanery

    Borrow the handling fee on top and pay the handling fee + £5 back ASAP – before you start paying back the loan monthly

    As usual DYOR and make sure that your card provider does apply your payments to the dearest part of the loan first – this will be in the small print. As I read this from the card payments association they are bound by law to apply the payment to the highest interest part of the loan first, but I am sure that Tesco’s and your card-issuer’s lawyers are more crafty than I am clever. In theory your first payment (of £10,000/12=£833) should wipe out the high interest rate purchase bit, but something gives me the feeling that Tesco haven’t done it this way simply to win a crafty £3 extra on my putative £299 extra cost. You can’t exactly expect the sort of people who call a 3% APR offer a 0% interest offer to play straight down the line now can you? They’re also hoping you carry on buying consumer shit with the card, where they can sting you for 17% APR, cos you didn’t pay it all back in the month, did you Sir?

     

     
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