uSwitch.com PF warns consumers:

British Telecom's (BT's) latest offer with MBNA could end up costing over £200 in interest for a saving of just £15 a year

Nick White, Director of Financial Services at independent price comparison and switching service uSwitch.com warns consumers: British Telecom's (BT's) latest offer with MBNA, the credit card giant, could end up costing over ?200[1] in interest for a saving of just £15 a year"BT's new credit card, which is designed to save consumers money on their bills, could end up being a costly lesson in the complex 'order of repayments' that can fool the most savvy customer.

This card generously offers consumers a 0% balance transfer deal for 12 months and 0% on new purchases for just three months.

However, if a balance transfer is made to the card followed by new purchases, consumers will end up paying interest on the new purchases for the remaining nine months of the deal unless the entire balance is paid off in full after the first three months.

Due to the order of repayments, any payments made to the credit card will pay off the balance transfer first followed by new purchases.

"This completely defeats the object as consumers can only get a discount on their BT bill by making new purchases on the credit card.

Surely if this offer was in the consumers' best interest, it would give 0% on new purchases for 12 months to avoid interest charges that could completely negate the BT discounts." For the first £250 of spending per month, BT credit card customers will receive a discount on their BT bills of just one penny for every £2 worth of purchases.

This increases to 1 penny for every £1 spent on purchases over £250.

However, as soon as the three month 0% new purchase offer expires, interest on £250 of purchases each month could add up to £207.64[1] over a year.

The actual reduction to BT bills over the same period is just £15[2] so the consumer is actually out of pocket by £192.64.

To put this into perspective, a customer subscribing to a BT Option 3 Anytime plan would pay £6.70 per month instead of the usual £7.95, a monthly saving of £1.25.

This saving is completely negated by the interest on the credit card unless the customer pays the bill off in full every month.

In fact, to qualify for the maximum £75 discount that can be made each year [3] customers need to spend a whopping £9,000 a year[4].

This would end up costing them £622.91[5] in interest if they made the minimum repayment each month including any balances transferred.

Nick White concludes: "Consumers that spend £9000 on their credit card each year would do better to use Capital One Cashback card.

This would earn them £157.50[6] cash-back over 12 months.

If the customer then signs up to Madasafish's Talk Anytime Plan costing £5.99 per month (with the first 3 months being free) the customer will be left with £103.59[6] to spend on whatever they want and have their phone bills taken care of.

Alternatively, die-hard BT fans could stick with their BT Option 3 Anytime Plan and still be left with £62[7] to spend how they wish by earning £157.50[6] on a balance of ?750 a month on a Capital one Platinum Cashback card." For more information on Credit Card, Broadband and Mobile Phone deals visit www.uSwitch.com or call 0800 093 06 07.

Notes.

1.

This card offers 0 % for 3 months and then reverts to 16.9% APR for the remaining 9 months the interest.

By assuming: The customer has spent £250 per month over 12 months.

The customer would be charged interest of £207.64 at a purchase APR of 16.90% which is offered on the BT credit card.

The customer has only paid the minimum repayment on the card of 3%.

2.

Customers could save approximately £1.25 per month on their BT phone bill.

This is based on the assumption that the customer uses their BT card for £250 worth of purchases each month getting back £0.01 for every £2 spent.

Over the year this would equate to £15 worth of savings on their BT bills.

3.

According to the BT terms and conditions Maximum discount in any 12 month period is £75.

4.

In order for a customer to make the maximum saving of £75 per year using their BT credit card, they would need to spend £750 per month to make a saving of £6.25 each month.

Taken over 12 months the customer would need to spend £9000.

5.

This card offers 0 % for 3 months and then reverts to 16.9% APR for the remaining 9 months the interest.

By assuming: The customer has spent £750 per month over 12 months.

The customer would be charged interest of £622.91 at a purchase APR of 16.90% which is offered on the BT credit card.

The customer has only paid the minimum repayment on the card of 3%.

6.

Capital One Platinum Cashback card - Offers 4% cashback as an introductory bonus for the first three months.

Once the three months are over, the customer will receive 1% cashback on any purchases made.

If the customer took out the Capital one Platinum cashback and they spent £9000 in one year (£750 a month).

The total cashback payout on this card would be £157.50 over 12 months.

£103.59 is the saving made by switching to Madasafish's Talk Anytime Plan costing £5.99 per month, with the first three months for free.

7.

BT Option 3 over 12 months will cost (£7.95 x 12) £95.40.

Cashback with Capital One would gain a customer £157.50, leaving £62.10 in consumers pocket.

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