Do I lose the grace period on new purchases after a promotional balance transfer on some cards but not others?

Question

I just used my credit card from Barclay Bank to make a balance transfer at 0% APR for 18 months for a 2% fee.

I already paid the 2% fee, so I'm not planning on paying anything more than the minimum payment each month until the 18 month deadline, when I will pay the entire promotional balance left in one shot to avoid the interest. This obviously requires me to carry a balance during the promotional period, which I was under the impression disqualified me for the interest-free grace period on new purchases.

However, looking at the fine print on my previous statement, it reads:

You may also avoid paying interest on Purchases if either Paragraph A or Paragraph B of this section applies to your account.

Paragraph B applies to my account in this case, and it reads:

If you have Purchase balances with an APR that is greater than 0%, and you also have other types of promotional balances on your account, you still may be able to avoid paying interest on those balances without paying your Statement Balance in full. If this applies to your Account, you will see a Paragraph titled “Avoiding Interest on Purchases (Grace Period)” appearing directly below the Interest Charge Calculation section on the front of this Statement. This will show the amount you can pay by the Payment Due Date and still avoid interest charges on your Purchase balances. This amount may differ from your Statement Balance. It may differ because you currently have certain promotional APR balances, and the nonpayment of these balances will not affect your grace period on Purchases, provided you pay all other balances on your account.

I haven't been able to see this "Avoiding Interest on Purchases" paragraph on my statement because I haven't yet received my first statement with the promotional balance transfer posted, but I'm guessing that this amount they're talking about equals the minimum payment plus new purchases.

The letter I got in the mail with the balance transfer offer, I think also echoes the quoted text above. It reads:

You can avoid interest on purchases without paying your entire balance. Instead, you can pay, by the payment due date, your entire balance minus this reduced APR balance transfer balance.

My understanding has always been that I'd lose my grace period the moment I don't pay my statement balance in full, resulting in new purchases accruing interest the moment they post to the account. Is Barclay Bank being more flexible about this and saying: "It's OK. Just pay the minimum plus your new purchases each month and you get to keep the grace period"?

I also did a promotional balance transfer on my Capital One card a while ago, and they had similar wording but did not pay too much attention to it since I was not interested in using it for new purchases. However, unlike the Capital One card, the Barclay Bank card has some sweet cash back rewards, so I'd like to keep using it if I can. On the other hand, I have looked through my Bank of America card statement and it seems they don't have this flexibility in place; their wording seems to confirm that you do lose the grace period if you don't pay the statement balance in full no matter what you do.

Is this flexibility something some credit card companies offer but most don't? Or am I misunderstanding what Barclay Bank is saying?

Answer 1

Yes. That's typical. When money is outstanding via cash advance/transfer you lose the grace period for new purchases.

The minimum payment on the cash advance is still due and is credited first. Any further funds are credited to the new purchase. Keep in mind, there's nothing magic about waiting for the bill cycle. You can make an extra payment as soon as that charge hits to keep the interest down to a few days or less.

I had this same experience when I had such an advance outstanding, and the card's "5% bonus category" was something I was going to use. Even the full cycle interest charge wasn't going to exceed the 5% bonus, so I just used the card.

Answer 2

So it turns out that in the U.S, Capital One and Barclays are the only two banks that allow you to keep the grace period if you pay your new purchases in full in addition to the minimum payment each month without having to pay the balance from promotional balance transfers in full.

Other banks, however, will take away your grace period if you don't pay your entire card balance in full.

So, if you do a balance transfer onto a card not issued by Capital One or Barclays, it would be smart to throw that card into a drawer and never use it again for purchases until that balance is paid off; those purchases will start accruing interest immediately. Of course, it might make sense to still keep using the card if the rewards on purchases is greater than the interest you'd pay between the day the purchase posts and the day you pay it off.

Answer 3

My understanding has always been that I'd lose my grace period the moment I don't pay my statement balance in full, resulting in new purchases accruing interest the moment they post to the account. Is Barclay Bank being more flexible about this and saying: "It's OK. Just pay the minimum plus your new purchases each month and you get to keep the grace period"?

The card company wants your business and your money. They have to decide how each customer will bring them the most profit. If they think that you fit into a category that will generate the most profit by transferring a balance, and still using the card for every day purchases; and that not charging you interest for those daily purchases they will make more money from the fee they charge the merchants: they will make that offer.

If they think you fit into another category: they will make a different offer to get your business.

Make sure you understand what happens if you are late even once, or don't make the specified payment on the bill. Also understand what happens when the introductory period ends. It would be bad to be hit with unexpected fees or interest because you were caught unaware.