Barclaycard charging incorrect interest?

klint

Is any of you currently using a Barclaycard with an outstanding balance being charged at the standard interest rate? (E.g. mine is 13.9% pa or 1.094% per month.)

Have you checked if the actual amount of interest they charge you is equal to the rate quoted times the average daily balance throughout the month?

I am having trouble figuring out how they charge me the amount of interest they do. By my calculations, it's significantly more than it should be. I asked them to explain how they calculated the interest on my account and after waiting two weeks for their letter it turned out to be a regurgitation of their Terms and Conditions: no figures, just general guidance. Do I have a right to force them to disclose their actual figures used in their calculations?

Consumerist

How are you calculating your Average Daily Balance?

klint

Consumerist wrote: »

How are you calculating your Average Daily Balance?

In my case, it's very simple because I've stopped using the card and the balance has remained fairly constant throughout the month.

But in general, you would have to take the balance at each transaction, multiply that by number of days elapsed before the next transaction, repeat for each transaction and add all these up, then divide the whole lot by the number of days between interest charges (usually about a month.)

So for example: For ten days your balance was £100, for the next 20 days it was £200 and then there is an interest charge applied.

That's (10 x 100) + (20 x 200) / 30 = £167.

Consumerist

OK that's the way I do it too but I have known people take the average of the opening balsnce and the closing balance and call the result an average daily balance.

I don't have a Barclaycard but Tesco use the same general principle for calaculating interest charges and I have never been able to reconcile their "estimated interest next statement" with my own estimates. Since I pay off the card each month and don't pay any interest, I have no cause for complaint. In any case their estimates are always less than mine. Go figure !

I think, perhaps, your best course of action now is to lodge a formal (written) complaint. Head the letter Complaint so they know you are making a formal complaint and send it by Recorded Delivery post. You can use the Royal Mail's online tracking service to confirm it has been received. There is no reason why they should not provide you with at least an example calculation. If you are not satisfied with their response or you don't receive their response after eight weeks you can refer your complaint to the free Financial Ombudsman Service. It's likely to take some time these days but at least the bank will know you mean business.

Good luck. Please post back on your progress..

klint

Thanks, Consumerist, in fact I sent them a complaint by email and they promptly rang me back and promised to send me the details of their calculations. I will be very interested to see how they calculate it, because I just can't work out how they can possibly come to that figure using the interest rate they themselves quoted.

(It's only about £10 difference, so not a great inconvenience, but if I leave it unchallenged it could eventually build up to a large amount, and I'm also wondering, if it turns out that I am being overcharged, how many other customers are they doing this to.)

Consumerist

klint wrote: »

. . . and promised to send me the details of their calculations.

It would be of some interest to know the procedure they use. Perhaps you would post the general gist of what you receive.

klint

I've received their calculation, but it looks complicated and I haven't had a chance to study it thoroughly yet, due to other commitments. Basically, they seem to have calculated the average daily balance for the October statement period (the last time I was still making transactions) and added it to the average daily balance for the January statement period. This looks like double-counting to me, especially since I already paid October's interest in November. But before I accuse them of anything, I need to look at the calculation very carefully and therefore need to find enough time without interruption. I'll keep you posted.

klint

Ok, here's the answer. Their letter calculated the average daily balance for the October statement period because they explained how the interest on the December statement was calculated, even though I asked them to explain how they calculated the interest in my January statement. So much for customer service. Anyway, after studying the January statement myself, I think the reason the interest was more than I expected, was that I made a few transactions in early November on which interest was accrued and there was additional interest in December due to the days elapsed between the previous statement and the date they received my payment. This interest is then added to January's interest. So I think it's actually OK although a bit confusing.

Consumerist

klint wrote: »

. . . I think the reason the interest was more than I expected, was that I made a few transactions in early November on which interest was accrued and there was additional interest in December due to the days elapsed between the previous statement and the date they received my payment. This interest is then added to January's interest. So I think it's actually OK although a bit confusing.

I'm still not convinced.

Surely, the interest you are charged in any statement month is based purely on the Average Daily Balance calculated over that month. If your day-to-day balances, as derived from the transaction dates on your statement, are correct then the interest charged at the statement date should be the contracted percentage rate times that Average Daily Balance.

Interest charges for the period from the statement date to the payment date are only a factor where interest is charged on a daily basis at the contracted annual rate. In your case, however, the interest charges for that period will be derived from the Average Daily Balance for the following month.

I hope this is making some sense to you.

Consumerist

Well, I'm glad you were able to sort it out.

One would have thought that the average daily balance for October would have determined the interest charge on the [STRIKE]November[/STRIKE] October statement not December.

I'll ask someone else.

klint

To be honest I'm still not convinced either, looking at your post on 19 Feb and re-examining their explanation, I think you may be right, I really need to find some time when I have a completely clear mind to think about this properly as it's confusing.