If you transfer a balance over to a card with a 12 month 0% introductory offer, for example, you won’t pay any interest on that balance for 12 months – giving you the time to clear it without worrying about more interest being added.

Credit cards can also be a useful way to pay for purchases if you either opt for one with a 0% introductory rate on purchases or if you clear your balance in full every month. However, there is a potential problem with using credit cards in this way, which occurs when you mix purchases and balance transfers on the same card.

What’s wrong with mixing purchases and balance transfers?

It can seem like if you have one credit card you might as well use it for spending as well as transferring a balance, particularly if it has introductory offers on both, but doing so can mean you fall prey to one of the lesser-known credit card tricks. This is known as the negative order of repayment, and is employed by the majority of credit card providers.

What this means is that any repayments you make towards clearing your credit card balance will go towards clearing your cheapest transactions first (those earning the least amount of interest), and your most expensive transactions last (those earning the most interest).

As such, debts such as purchases and cash withdrawals made on your credit card will become trapped accruing interest at a high rate until you have paid off all your less expensive debts. This can mean that your credit card borrowing will cost you much more than you might have expected.

This problem is compounded by many credit card providers’ tendency to offer balance transfer and purchase deals on the same card, but to offer different lengths on these deals. For example a credit card might offer 0% on balance transfer cards for 12 months, and 0% on purchases for 6 months.

If you take advantage of both these interest-free deals, after the first 6 months of spending on the card any purchases made during that time will start to earn interest at the card’s standard APR – that is, if you haven’t cleared the card’s balance by then or continue to spend on the card.

These transactions will then be effectively ‘trapped’ on the card because any repayments you make will go towards clearing your cheap balance transfer (which is still earning 0% for another 6 months) before clearing your high-interest purchases.

In short, this means more money for your credit card provider because they will earn more interest from your credit card debt than would be possible if you were permitted to clear your more expensive transactions first.

How can I stop this happening?

First of all it would be a good idea to check the terms and conditions of your credit card to see exactly how your repayments are being allocated.

Credit card providers are required by law to give you this information, so simply contact your provider and request this if it isn’t immediately clear. You can also find out the order of repayments applied to any credit card in our comparison tables by viewing the full product details.

It’s likely you will find that your repayments are going towards your cheaper debts first before moving to your expensive debts such as cash advances and purchases accruing interest at the standard APR.

Armed with this knowledge, you can remove the negative order of repayment problem entirely simply by keeping purchases and balance transfers separate. It may be a good idea to shop around for individual 0% deals on balance transfers and credit cards, and keeping the uses of the 2 cards separate from each other.

However if you do want to use just one card for both purchases and balance transfers, the best thing to do is find a card that offers an identical balance transfer and purchase deal. If you find a card that offers an introductory period of 6 months, for example, on both balance transfers and purchases, you can safely use the card for both purposes for that initial 6 months.

Remember though that after the introductory period is over your balance will start accumulating interest at the standard APR, so unless you’ve cleared it by then it’s vital to move it to a new 0% deal. Remember too that even with a 0% deal on both balance transfers and purchases, it’s still crucial not to use the card for cash withdrawals as these will immediately begin accruing interest at the cash advance APR which is usually significantly higher than the card’s standard rate.

Cards that offer identical introductory offers on balance transfers and purchases will generally come with shorter interest-free periods, so unless you are happy to keep moving your debt every time an introductory offer runs out, the safest thing to do might be to simply keep your balance transfers and purchases on separate cards. This way the risk of the two mixing is removed entirely.