19 Jul 2013, 12:30pm
debt personal finance rant
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8 comments

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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?

     

    Agree with the post but:

    “So I pay no interest, but there’s 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. ”

    …no, it’s to stop me and my sneaky brethren from minting free money from true 0% interest by stoozing!

    Ah, those were the days. Still, keep reading the small print and we’ll find another more positive niggle to work eventually. 🙂

    Ah, Stoozing, I remember it well… I once borrowed £15,000 from MBNA and Capital One to stick in the Nationwide because the cards kept offering me free money back in the days when 0% meant 0%… Rude not to take ’em up on it IMO!

    I got the Tesco card for truly interest-free 15 months on purchases so I could maximize my pension contributions and then pay off the loan with a little bit of the redundancy money. It would have worked better had I not driven dowm my costs but at least I got a year’s groceries and a few cases of red wine at 30% off thanks to HMRC 😉

    Nowadays I can’r turn a profit on my own cash, so there’s no chance with someone else’s at 3.5%!

    20 Jul 2013, 5:40pm
    by BeatTheSeasons

    reply

    I recently transferred a balance to what I’m pretty sure was a genuine 0% Tesco card.

    In the 12th June MSE email it was promoted thus:
    “Shift existing card debts at NO COST with the first totally-free decent balance transfer for years. Another week, another salvo in the balance transfer price war. Now Tesco’s rolled back to t’golden fee-free days.”

    In the welcome email Tesco wrote:

    “Thanks for choosing a Tesco Clubcard Credit Card. Your new card is on its way, and it will be with you very soon if you haven’t already received it.

    With 0% on all purchases for 12 months and 0% on balance transfers for 12 months (0% fee), plus Clubcard points* on every purchase, your everyday shopping is about to get a lot more rewarding.”

    It appears this deal is no longer available.

    I got that email too, that’s the usual better terms for new customers line 😉

    When I was working I’d close cards after using a deal because they’d consider you a new customer after 12 months.

    I don’t close any of my cards now because a) I can’t be bothered to play that game b) a retiree carries no debt and c) I have no idea of whether any credit card firm would give me a new credit card with zero income though an impeccable repayment record. I don’t know if their systems are sophistcated enough to process the concept of investment income. All that notwithstanding it’s the brazen lying about 0% that hacks me off! For some people there’s nothing wrong with a 3.5% loan rate for a year. It just should be called that!

    The unwritten rule (from MSE and others) about these card accounts was use them to park debt that you’ve already racked up and are repaying at a higher rate, and ensure you pay it off/transfer again by the deadline date.

    NEVER use the card for actual purchases, in fact lock it away/cut it up.

    I used one once when it was genuinely free, but the companies soon got wise to the free money trick. Never mind it was good whilst it lasted.

    As Confuscious say ‘a debt at 0% IS STILL a debt!’

    @Marky Mark — Hmm, I’ve run up about £4,000 on a 0% on purchases credit card over the past year or so. That’s the equivalent of saving into a cash savings account paying about 3%, given the impact of inflation, and what’s more it’s tax-free. At the end of the term I’ll either transfer it (unlikely) or pay it off with one lump sum. (Likely, and easier for me as I have some extra capital flexibility due to being self-employed).

    31 Jul 2013, 8:22am
    by Marky Mark

    reply

    Ah, I wasn’t clear enough (as usual) – I meant where you transfer an existing debt to a new card, don’t also use the card for purchases as the interest loading can sometimes operate in the card issuer’s favour.

    Obviously you guys are savvy enough to play the banks at their own game!

    I can beat your measly 3% charge!

    I just got an email from Barclaycard kindly offering me a balance transfer at 0% for 12 months, with a whopping 3.9% handling fee!

    Unbelievable!

     

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