Tesco Credit Card Interest Charge Query

littlerob_2

Hi all

I've just checked my latest Tesco Credit Card statement and noticed that they have charged me interest. Not an unusual occurrence you may think...... Only problem is, I paid off the entire balance of my account the previous month, so all that was on my account was spending from this month. Just so people don't get confused, my introductory 0% on spending deal finished a couple of months ago.

I rang Tesco and was told that the interest was because I had not cleared my account in full last month. When I pointed out that this was clearly incorrect I was then told that it was because I had not cleared my balance in full during the previous month. Not to be thwarted I pointed out that they had already charged me interest on this, and I had already paid that interest off when I cleared my balance last month. Tesco then 'agreed' to refund me this latest interest charge.:T

My wife has recently had exactly the same experience with Tesco, and I wonder if anyone can clarify whether this is standard practice, or whether they are 'trying it on' in the hope that us Money Savvy Money Savers won't spot this deliberate attempt to recoup lost interest that would have been accrued during the introductory 'interest free' period?

Cheers
Littlerob

molerat

You need to clear the balance in full for 2 consecutive months before you pay no interest. Interest is charged up until statement date. There is then further interest accrued between statement date and the date you pay off that statement which appears on the following statement.

bengal-stripe

littlerob wrote: »

Not to be thwarted I pointed out that they had already charged me interest on this, and I had already paid that interest off when I cleared my balance last month.

The interest you find in the statement is charged up to the day the bill got compiled. Your payment did arrive some 10, 15 or 20 days later. Until you payment has been credited, you still have an outstanding balance and are in debt to the CC. For these days you still have to pay interest, which is charged with the next statement.

It's called 'trailing interest' and all CC work like that. Once you have paid two consecutive bills in full, there is no more trailing interest to come.

GlamGirlie

Surely you don't pay interest until the repayment date has passed?

Gromitt

GlamGirlie wrote: »

Surely you don't pay interest until the repayment date has passed?

The depends. Residual interest is possible if you made a late payment the previous month or left a balance the month before. Or if you were on a promotional rate (such as 0%) that ended before the payment due date. The latest is the most common mistake - interest will be charged from that date and charged the next month.

GlamGirlie

Really? I honestly never knew that! We mistakenly left £60 outstanding after mis-typing the payment figure when making the payment to the Tesco card via internet banking.

Now we are being charged £35 interest!

I can't get my head around the fact they can charge interest on the full balance even though there was only £60 owing???

Fruit_and_Nut_Case

GlamGirlie wrote: »

Really? I honestly never knew that! We mistakenly left £60 outstanding after mis-typing the payment figure when making the payment to the Tesco card via internet banking.

Now we are being charged £35 interest!

I can't get my head around the fact they can charge interest on the full balance even though there was only £60 owing???

FYI this is standard for all credit cards, not just Tesco.

opinions4u

GlamGirlie wrote: »

I can't get my head around the fact they can charge interest on the full balance even though there was only £60 owing???

it's not just interest on the £60. You had a period prior to that payment where you owed significantly more. You're paying interest on that larger balance too.

If you're not clearing the balance in full the balance will be charged interest in much the same way as a typical authorised overdraft.

tomsco

GlamGirlie wrote: »

Really? I honestly never knew that! We mistakenly left £60 outstanding after mis-typing the payment figure when making the payment to the Tesco card via internet banking.

Now we are being charged £35 interest!

I can't get my head around the fact they can charge interest on the full balance even though there was only £60 owing???

3 words - average daily balance.

chattychappy

The way to think of it is that interest is calculated on the daily balance. If you pay the statement balance in full by the due date it isn't applied.

If you don't then it is applied and appears on the second statement. Even though you may then pay that statement in full, interest for the period between the second statement date and when payment arrived will still be owing and will appear on the third statement (trailing interest). Assuming the third statement is paid in full, no further interest will appear. Hence the rule about paying two consecutive statements in full to get back to interest-free.

Where it hits hardest is if you "almost" pay your statement balance in full.

Eg Transation date: 1st January - £500
Statement date: 20th January
Due date: 15th February

You pay £499 on 14th February.

Next statement date: 20th February

The February statement will show interest on £500 for 14 days and £1 for 51 days (1st Jan to 20th Feb).

So... just because you paid short by £1 you get 2 weeks interest on £500. Typically £5!

GlamGirlie

Thank you everybody!