MBNA Card - Order of Payments - Incorrectly charged interest?

AgentDaleCooper

EDIT *** Sorry, subject says MBNA but it's RBS, momentary brain freeze! ***

Hi all,

I have an RBS Worldpoints card, I use it for day to day spending and clear in full every month - no interest charges - happy days.

They offered me a 0% for 12 months on BTs and I had a large purchase to make so I ended up transferring just over £2000 from another CC to the MBNA card.

When I made the transfer, I had about £900 of transactions from that month sitting on the card already. The bill comes in at the end of the month and I make a payment of the total balance MINUS the balance transfer amount (i.e. I paid the amount of purchases I'd made that month).

With positive order of payments, I thought my payment had to be applied to the purchases I've made (as they are at my purchase interest rate) before the BT. However, I've looked at my last statement (a month later) and I'm being charged ~£25 a month in interest.

I phoned RBS and they said it is because I made a BT onto a card that already had a balance on it (the purchases I'd made during that month). This doesn't make sense to me, as at the end of the month when I make my payments it should still be applied to pay off my purchases which leaves my BT sitting there at 0%. The lady from RBS said she could "see what I was trying to do" but that the system "wasn't clever enough" to process it that way. When I asked if that meant the system was incorrect, I was told (of course) that it was correct.

I think the upshot of this is that there is no way I can now avoid paying monthly interest on my account - I asked the lady on the phone and she agreed. If that is the case I will just have to clear my account completely and use another CC. In that case I will close my RBS account and they will lose a customer, but I doubt they care much :-/ I'd rather get my interest charges back and stay with them though! Can anyone advise on whether they are correct or not about the interest they're charging?

Many thanks,
Dan

Scarpacci

How long ago did you make the balance transfer & purchases and how many statements have you had since? How many of those have charged interest?

I'm not sure whether the payment you made was allocated incorrectly. If everything went fine, you would still have had some interest to pay on the initial statement and then some residual interest. However, the interest there should stop after a few statements.

Your purchases only have 0% from the purchase date if you pay your bill in full - that means everything, not just purchases. So for the first statement, you should have interest on the purchases. Then when you have paid the purchases off, they should stop earning interest, but there would still be some residual interest. A few statements later, this would stop and you would be back to having just a balance transfer at 0%.

If that is indeed the way RBS have handled your payment, then they are entirely correct and you won't get the interest back. The advice generally is not to mix 0% balance transfers and purchases for just this reason. You shouldn't be paying interest for the life of the balance transfer though, provided you pay off the purchases and resulting interest.

AgentDaleCooper

Many thanks for the reply.

March 17th - bill for March ~£1000, due April 10th
March 27th - balance transfer of £2000
April 10th - payment of £1000 to cover purchases
April 17th - bill for April, ~£3000 (inc BT) interest charge of 63pence!
May 10th - payment of £1000 to cover purchases
May 17th - bill for May, ~£3000 (inc BT) interest charge of £23.86

Does that look feasible? It's much easier with Barclaycard's website to tell what's going on as they give you a breakdown of how much you owe at different interest rates.

I think the key statement from your reply is probably "Your purchases only have 0% from the purchase date if you pay your bill in full - that means everything, not just purchases." So if I understand correctly, do you think if I pay off everything above the original BT amount and stop using the card for further purchases, the rate will go back to zero?

Many thanks,
Dan

thenudeone

The allocation of payments is probably working correctly.

What you're overlooking is that you have lost the interest free period on your purchases. Even though you may have paid the purchases by the due date, you haven't paid the full statement balance, so you are being charged interest from the date of the purchase until date they're paid off.

Even though any payments are allocated to higher interest balance first, the old golden rule still applies: never combine purchases and balance transfer offers on the same card.

If you had put all your purchases on a separate card and paid them off in full, there would be no interest charged on either card.

Once you've paid off the purchases balance (plus interest), and don't make any more purchases, the interest charges should stop. There's no need to pay off the BT balance as well.