Interest charges

thebloms

Hi folks,

This is the first time I've had to pay credit card interest charges and I think there is an error somewhere. I have been charged interest on the unpaid balance from last month, which I expected. However, I was also charged interest on this month's purchases. Should I not get the opportunity to pay these purchases in full, in the first instance, then be charged the interest next month if I don't do it?

For example, if I owe £2000 from last month then I expect to be charged interest on that. Let's say the interest on that is £20. If I spend a further £1000 this month then surely if I pay £3020 before the deadline then that should be me up-to-date.

If it is correct that you're charged for recent purchases when you don't pay in full the month before, then shouldn't the payments you have made come off as well?

For example, if I owe £2000 from last month then spend £1000 this month, however I pay £500 meantime, surely I should only pay interest on £2500 and not £3000.

According to them I have to pay interest on last month's outstanding balance, plus recent purchases and the payments I've made (although showing on my statement) don't count against interest till next month! It just seems a biased decision in the credit card company's favour.

Thanks for your help.

andy_hunk

thebloms wrote: »

Hi folks,

This is the first time I've had to pay credit card interest charges and I think there is an error somewhere. I have been charged interest on the unpaid balance from last month, which I expected. However, I was also charged interest on this month's purchases. Should I not get the opportunity to pay these purchases in full, in the first instance, then be charged the interest next month if I don't do it?

For example, if I owe £2000 from last month then I expect to be charged interest on that. Let's say the interest on that is £20. If I spend a further £1000 this month then surely if I pay £3020 before the deadline then that should be me up-to-date.

If it is correct that you're charged for recent purchases when you don't pay in full the month before, then shouldn't the payments you have made come off as well?

For example, if I owe £2000 from last month then spend £1000 this month, however I pay £500 meantime, surely I should only pay interest on £2500 and not £3000.

According to them I have to pay interest on last month's outstanding balance, plus recent purchases and the payments I've made (although showing on my statement) don't count against interest till next month! It just seems a biased decision in the credit card company's favour.

Thanks for your help.

Hi

I'm not sure if they have worked out your interest correctly (check the small print) but if you get charged £20 interest in a month it's time to transfer to a new 0% anyway! Barclaycard have a 17 month jobby on atm............

http://www.barclaycard.co.uk/personal-home/cards/platinum-hero/platinum-0-interest/index.html

Consumerist

The interest charge on any statement only covers the period up to the statement date. Interest is also chargeable up to the date of repayment. The latter charge will appear on your statement the following month.

theoretica

The thing with purchases is correct (if your small print is like mine)- it is biased in their favour. If you pay £500 mid month I would expect you to only be charged interest on that £500 up until the moment you pay and not afterwards, but it wouldn't wipe out the interest charges for the first part of the month, before you paid.

Consumerist

theoretica wrote: »

The thing with purchases is correct (if your small print is like mine)- it is biased in their favour. If you pay £500 mid month I would expect you to only be charged interest on that £500 up until the moment you pay and not afterwards, but it wouldn't wipe out the interest charges for the first part of the month, before you paid.

I don't quite see what you mean by "biased in their favour".

If you don't pay off your entire balance each month, interest is charged on each transaction from the date of the transaction until the date it is repaid. I don't see any bias in that.

chattychappy

Consumerist wrote: »

I don't quite see what you mean by "biased in their favour".

If you don't pay off your entire balance each month, interest is charged on each transaction from the date of the transaction until the date it is repaid. I don't see any bias in that.

Yep. I think the point is that the usual system of "up to 56 days interest free credit if you pay in full" represents a concession which is lost, even if your payment is only £1 short.

thebloms

Consumerist wrote: »

I don't quite see what you mean by "biased in their favour".

Well I'm thinking this: let's forget last month (which I'm paying interest on and rightly so, as I couldn't pay the balance off in full).

This month I have made purchases and have not had a chance to pay these purchases off in full but I'm getting charged interest on them, however the payments I have made to account (so credits) do not count towards the interest. So if I spend £700 and pay £500 I still get charged interest on £700.

Surely if they add recent purchases on they must also minus payments off. Conversely, neither should be added/subtracted till the next month giving me the option to pay off these new purchases in full.

The fact is I couldn't pay my bill in full last month but I can pay the lot this month, so I don't think the interest for these new purchases should have been added on till next month, at which point I would've paid in full anyway.

I hope this makes sense and really appreciate everyone's input. My head is beginning to pickle! :eek:

opinions4u

Think of it as an overdraft. You accrue interest immediately on any overdrawn transaction.

But a credit card is very kind and waives the charge if you clear the balance in full. As soon as you don't clear the balance in full, you lose this generosity.

chattychappy

Interest will be calculated by reference to the transaction date. So once you're out of the interest-free thing, then the sooner you can make a payment the better. You will pay less interest by paying earlier.

Right now you are accruing interest on those transactions that you didn't pay off last time and will continue to do so until payment reaches them. This interest will be shown on the next statement (trailing interest). Assuming you pay off the balance shown on the statement you are holding now in full, then you shouldn't be charged interest on the purchases shown on that statement* or further purchases. (*I'm not absolutely certain of this as I have never paid interest on my NW account. The T+Cs are not well drafted in my opinion but suggest to me that you wouldn't. For some cards you certainly would.)