Paying off a credit card balance - Residual charges

Monvon

Hi, new to this forum but not to MSE emails etc.

I wanted to get some info on paying off a balance and then being charged interest not once but twice after my statement was sent.

To explain further I put over 2k onto a 0% for 11 months which ended in Nov 11. It was with Bank of America. I had set up a direct debit and then made overpayments each month. The DD came off when the bank decided (around the 24th of each month)

At the end of the promotional period I was sent a statement for November 4th but the dates had changed for when payment was due, i.e my DD date was no longer in line with making payments on time.

Anyway at this point I was lucky enough to pay off the outstanding amount of £2,054 in one go (with some help). On Dec 4th statement date I received a bill for £30.37. When I called to query this having stated I had paid off in full my Nov bill they said that interest was calculated "in arrears" and that this was a legitimate charge to me as this was interest accrued before the £2,054 was paid off. I disputed payment and escalated this to a manager but paid off the £30.37 as I didn't want more hassle or them to start charging me fees for non payment. I then thought that my balance would be £0.00 but no:

On Jan 4th statement my balance was £1.09 which again when I called to query is a legitimate charge and is called a residual charge. I asked for this to be written off to which I was told that it was legitimate and if I did not then would incur penalties. Then I was told that further to this statement I was accruing further residual charges and that my next statement would ask me to pay a further estimated £1, on top of the £1.09 already on the Jan statement.

I am absolutely appalled but aware that this is how credit card companies work - they would not write the charge off and the only way they could close my account was for me to pay £2.09.
I agreed and closed the account - has anyone else tried to pay off balances only for this to happen and if so what did you do about it? I was considering writing to the financial ombudsman as I feel cc companies are keeping people in debt by the way they calculate their charges and itnerest.

Monvon

CLAPTON

Normally if you pay your statement balance in full for two consecutive months then all interest stops

When a promotional balance period ends, it's fairly normal that this won't correspond with the normal payment date so it then follows that even if you pay this balance in full there will be two further periods which will show interest.

thenudeone

A statement can't see into the future to know when and how much you are going to pay. It can only state the interest that has been incurred at the date the statement was prepared. (It will, however also state an ESTIMATE of interest that would be payable assuming you only made the minimum payment by the due date)

Even if you pay the statement balance in full on the next day, the following statement will still have one day's interest on it. This is perfectly legitimate. You have borrowed the money for 1 more day than you had previously been charged interest for. If you left money in a bank savings account for 1 more day you would expect your 1 day of interest wouldn't you?

When your next statement is prepared, the amount of interest is calculated. Once it appears on a statement you will start to incur interest charges on it (remember you owe them that money and they are entitled to their interest). This is exactly the same as a savings account that pays interest into the account monthly. Once the interest is added to the account it will start earning interest itself.

The way credit cards work is fairly standard and what you have described is not unusual.