Tesco's Visa card interest-free offer

I recently opened a Tesco Visa card which offered the following:

(1) Tesco offered to pay the initial Stamp Duty charge of €40;

(2) Tesco offered 0 per cent interest on all balance transfers and purchases for the first six months.

It was my intention to cancel my existing credit card later this year. From my point of view, this would mean six months interest free credit at no cost or additional stamp duty liability.

My first statement arrived and set out the outstanding amount and a minimum payment figure. I had not exceeded my credit limit. I did not pay the minimum payment figure initially as I understood that I would not need to make any payment for six months.

Tesco informs me that the minimum payment must always be made irrespective of the offer in place. It also informs me that I am likely to incur penalties for not making the minimum payment on time.

I have reviewed the promotional documentation and correspondence with Tesco and cannot find any direct reference to the minimum payment requirement during the six-month interest-free period. Surely the "six-month interest-free credit" in this instance amounts to false advertising?

Mr L.O'C., Dublin

That's very unlikely. I have not specifically seen the promotional documentation you have received but I did download, from the Tesco.ie website, the terms and conditions governing its credit card. As this also includes the 0 per cent promotional offer, I would guess it's operating on the same terms.

As usual with these things, it is three A4 pages of small print. To be fair to Tesco, however, it appears the part relating to your query is pretty close to the top.

The second paragraph under the headline "This is a copy of your agreement for you to keep" states: "Within 25 days after the date of each statement, you must pay us at least the minimum payment shown on your statement. The minimum payment will be:

3 per cent of the new balance shown on your statement or

€6.35

whichever is more. However, if the new balance is less than €6.35, you must pay the full new balance."

This actually comes ahead of the paragraph which outlines the interest rates charged, including the 0 per cent measure on purchases, including balance transfers for the first six months.

On that basis, it would appear that you are due to make a minimum repayment.

For what it is worth, I would assume that a promise of 0 per cent interest free credit means that you will pay no interest on the sums built up - not that you are absolved from making any payments on the account.

It would be a very unusual credit card provider who would be happy to receive no payments from a customer, especially a new one, for a six-month period on an outstanding balance.

The 0 per cent offer is to attract new custom - offering a six-month repayment moratorium would be a much higher risk proposal.

As to penalties, the same terms and conditions seem to indicate in the last paragraph on page two that you are liable to a late payment charge of €6.35 on top of the initial payment due.

Mortgages

My husband and I have inherited some money. We are in our 50s and own our home. We want to buy a house with €400,000 cash and to borrow €250,000 over 15 years. We also have €200,000 on deposit in a bank. Should we borrow from First Active's Current Account Mortgage and use some of our savings to reduce the interest on the loan? We hope to rent the house for a few years.

Ms B.C., Dublin

The current account mortgage is specifically geared to benefit those people who live within their monthly means - ie they spend less each month than they receive in income into their current account.

There is nothing to stop you using this type of mortgage and transferring some of the money from your deposit account to your current account to reduce the balance outstanding and, therefore, the interest due. However, as a general rule, you would be better to use the savings to reduce the mortgage required in the first place.

You are earning far less on a bank deposit than you will be paying on the current account mortgage, or any other mortgage.

In fact, even if you do want to hold on to some of your savings, you should look for the best deal available beyond the current account mortgage option. Remember, you can transfer savings to make lump sum payments against the capital sum owing on any variable rate mortgage, similarly reducing your interest due and the time over which the mortgage will be repaid.

I can see why people would be nervous to put all their savings into this type of investment. It is always a good idea to keep some aside for a financial rainy day, but the key point is that you should choose a the product that allows you flexibility to make lump sum payments without penalty and charges the lowest interest rate.

Pensions

I am moving job and want to know what to do with my existing pension savings. I have two occupational pension funds that I can leave in place, transfer to my new employer or switch into a buy-out bond.

One fund guarantees me a certain pension on retirement and will be revalued annually if left where it is. The revaluation is guaranteed to raise the pension by the consumer price index or a figure set by the company, whichever is the lower. The second fund's performance, if left with the current employer, is determined by the underlying performance of the contributions previously made to the fund.

Am I better leaving these funds where they are, transferring them to my new employer or moving them into a buy-out bond?

Ms A.C., Dublin

Looking at the two funds separately, the first thing to note is that the first one is in the form of a defined-benefit scheme. In effect, the company is guaranteeing you a certain income for contributions made by you and your employer.

Better still, it is indexing this income by the consumer price index or a base percentage annually when the fund is revalued.

Defined-benefit pensions are the gold standard of the industry and the general advice is that anyone in possession of such a pension should hang onto it.

Hibernian's head of pension development, Martin O'Hora, has worked on the figures you presented and says that no adviser would reasonably be able to advise you to do other than leave that first fund where it is. It's conceivable it could perform better elsewhere, but that is too big a chance to take.

The second fund is a defined-contribution product and so the judgment call is not as clear cut. Essentially, if you are happy with the investment strategy of the trustees of the fund, leave it where it is; otherwise move it.

The advantage of opting for the buy-out bond over a simple transfer to your new employer is that you can choose from the entire fund manager market for the product that best suits you.

For instance, with the first fund guaranteeing an income and, presumably, you entering a new pension arrangement with your new employer, you might have the flexibility to take a chance and put this second fund into a higher-risk product.

The choice would be determined by your attitude to risk.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, D'Olier Street, Dublin 2 or e-mail to dcoyle@irish-times.ie. This column is a reader service and is not intended to replace professional advice. Due to the volume of mail, there may be a delay in answering queries. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.