Interest on zero balance!

scottishman

Can somebody explain to me why I had a £13.53 interest charge on my last Sainsbury's credit card bill when my balance was £0?

13 Sept 2010 balance was £1659.91 to be paid by 8 Oct 2010. Min payment was listed as £37.34 with "Next months estimated interest" listed as £20.21.

I paid of the full balance of £1659.91 on 4 Oct 2010 (4 days prior to deadline). However on 13 October, an interest charge of £13.53 has been charged!

I have spoken with a very nice lady at Sainsbury's who tried explaining but I could not grasp it. I paid of my bill in full on 4 October and I was then charged interest on 13 October!!!! To be fair to Sainsbury's they have "as a good will gesture" refunded the £13.53.

MY main question is, to avoid this interest charge in future, if I have a deadline to pay a credit card payment of the 8th of the month, how much sooner than the 8th should I pay???

Fruit_and_Nut_Case

The 8th will be the date by which the payment should have cleared. Unfortunately the banking system is not (yet) instantaneous. Your statement (possibly on the back of a page) will probably have a list of typical clearance times for various payment methods.

Gorgeous_George

Was the bill before cleared in full (i.e., August's statement)? If not, interest continues to be charged on the WHOLE balance of the previous statement.

Fair play to Sainsburys for letting you off.

GG

jen245

Its trailing interest from when the bill was generated until the payment was made. You have to pay your bill in full for 2 consecutive months before no interest will be charged. I had this on a couple of CC accounts I closed down earlier this year

chattychappy

Interest from the month before as GG says (ie you only part paid the previous statement).

Generally you have to pay two consecutive statements in full before you see zero interest.

If it was a problem clearing in time then probably you would have received late charges too.

scottishman

Thanks for all the replies

The card was on 0% interest until September. That's why I paid it off in full in October.

The payment cleared on 4th October.

Maybe the lesson for me here is, on my new Tesco mastercard, which is 0% until next September is to make sure I pay any balance off in August.

Thanks again for the quick replies - my very first forum post!

chattychappy

scottishman wrote: »

Maybe the lesson for me here is, on my new Tesco mastercard, which is 0% until next September is to make sure I pay any balance off in August.

I expect you would be OK if you paid off in full by the exact date the 0% offer ends. This won't necessarily be a "due by" or "statement" date.

lisyloo

MY main question is, to avoid this interest charge in future, if I have a deadline to pay a credit card payment of the 8th of the month, how much sooner than the 8th should I pay???

The interest shown was ONLY up to your statement date.
They cannot possibly know when you are going to pay (no crystal ball you see), so the remaining interest is from statement date until payment clearance.

The way to get round this is to pay some extra to cover the estimated remaining interest. You may be unable to calculate this precisely so I would try to pay some more, you can always recover any left over by buying some essential food or petrol.

chattychappy

lisyloo wrote: »

The interest shown was ONLY up to your statement date.
They cannot possibly know when you are going to pay (no crystal ball you see), so the remaining interest is from statement date until payment clearance.

The way to get round this is to pay some extra to cover the estimated remaining interest. You may be unable to calculate this precisely so I would try to pay some more, you can always recover any left over by buying some essential food or petrol.

Yep. Though in this case there was no interest shown up to his statement date. (There would have been, but it was at 0%.) The problem was that the 0% offer expired between the statement date and the day the OP paid. As you say, the interest applied was from the statement date to the clearance date - so some days would have been at 0% and some at the standard rate.

david39

lisyloo (and others) are correct - it's interest from the period the statement was issued until the date you paid it.

But another point here - on most cards with a zero interest rate period the free period does not necessarily end on the date the last statement of the period is produced.

In most cases (in the small print T&Cs), you will find that the interest period runs for a number of calendar months from the day that the first purchase (or balance transfer) was made. This means that, if you think the i.f. period ends on the date the statement is prepared, you may well be wrong. It could end earlier in the month and therefore attract interest from that date instead.

lisyloo

In most cases (in the small print T&Cs), you will find that the interest period runs for a number of calendar months from the day that the first purchase (or balance transfer) was made.

My own personal experience is that this is often stated as "account activation" date. This is often before you receive the card and is when they open your account internally.
Some companies print it on statements and make it very clear.
Others don't put it anywhere and you need to ring them up and ask as there appears to be no other way to find out when it is.