Photo Credit:  Vipez

You know those enticing balance-transfer offers credit card companies were making us every other day? The ones where we could transfer our $1000, $5000 or whatever balances over to the new card and pay only 2% interest for 6 months? Here’s the very, very nasty little hidden catch: our subsequent payments would first be applied to this newly-transferred low-interest balance portion and meantime, if we made new purchases (usually at 19% or so interest), we had no way of applying our payments to the high interest portion until we’d paid off the transferred amount in full.

So, let’s say Joe Canadian transferred over $5000, then bought an airline ticket for $1000. Until he paid off the $5000, he was stuck paying $190/year in interest for the airline ticket. And my hunch is that most folks who transferred their balances did so because they couldn’t manage to pay it off. So Joe Canadian would be stuck at the high interest rate on the airline ticket for years and years.

Like I said, nasty.

I just got a New Cardholder Agreement in my mail. Nerd that I am, I read it and interestingly, Payments will now be applied first to those amounts bearing the highest interest rate. This is much fairer to the consumer.

Visa is also playing cleaner by giving 21 days interest free on new purchases even if there is an outstanding balance from the previous month, effective Sept. 1, 2010. Currently, unless Joette Canadian pays off her card in full, she accrues interest on all new purchases immediately.

I notice that the author of Reality Check is cynical about his bank’s new Agreement in this regard. This puzzles me — I’m assuming Visa changed their policy for everybody, not just my bank. Can anyone shed any light on this? Have you received a New Agreement? If so, does your Visa now offer 21 days interest-free on new purchases?