Interest charges

Lolmf

Can anyone tell me if this is correct.....

Last month I had a credit card bill of £3155.07. I always clear my bill in full each month, however due to a bereavement my mind was elsewhere, I didnt check my bill propery and only paid £3100.00. I realised my error approx 2 weeks later and paid the outstanding amount. The card provider has now charged me £69.74 interest for not clearing the balance in full.

My next bill is just over £1000 but it states that if I make the minimum payment of approx £80, the interest next month will be approx £18 on the outstanding £970 !!

So to summarise, I am being charged £69.74 for a balance of £55.07, yet next month £18 for a balance of £970.

I have read on a money advice website that the interest is charged on the unpaid balance but do you think my provider is charging me interest on the whole amount even though I have paid them most of it ??

And if this is so, is it legal?

Cheers

unimaginative_user_name

Unfortunately I think that's standard practice. Credit card companies generally only waive interest when the balance is cleared in full. I don't know if there are any companies which do things differently.

dzug1

Yes your issuer is charging you interest on the whole amount, just as any other issuer would do and yes it's legal

Being charged no interest is dependent on paying the FULL amount.

Never pay nearly all the amount off - it will cost you disproportionately in interest - as you have found out the hard way

Lolmf

Do you mean standard practice about interest charges or the way it is calculated ? I dont mind paying interest on the £55.07 I owed them but I dont understand how that figure can be £69.74. As I said it looks like they are charging me interest on the whole amount, of which they were paid most of it. That's the bit I want to know about being legal (if it is, its certainly immoral !!)

This extract is from the Citizens Advice Bureau website



Interest on purchases

If you pay less than the full balance due, you will be charged interest on what’s left, unless you have an interest free deal. .

CLAPTON

Lolmf wrote: »

I have read on a money advice website that the interest is charged on the unpaid balance but do you think my provider is charging me interest on the whole amount even though I have paid them most of it ??

And if this is so, is it legal?

Cheers

I doubt very very much that you have read that on a money advice website.


Your T&Cs will say that they charge interest from the date of purchase to the date you pay the money off.
Only if you pay the whole amount off each and every month in full do they waive the interest.

so you have been charged interest on your daily balance or put another way on the average monthly balance.

all CCs work in this way.

Lolmf

Ok, thanks dzug1. I cannot believe thats legal !! Fortunately for me, they have agreed to waive the charge

Lolmf

Sorry Clapton, it was on CAB website not money advice !

opinions4u

Lolmf wrote: »

Ok, thanks dzug1. I cannot believe thats legal !! Fortunately for me, they have agreed to waive the charge

Interest is calculated daily.

If you owe lots of money for most of the month and a little bit of money for a small part of the month your interest bill will be calculated, in the main, on the bigger balance.

Much like a traditional overdraft would be charged.

Credit cards are nice when you clear the balance in full as they don't then charge you interest. But you should see this as a concession.

So of course it's legal.

CLAPTON

Lolmf wrote: »

Ok, thanks dzug1. I cannot believe thats legal !! Fortunately for me, they have agreed to waive the charge

strange really

virtually every savings account pays interest based on the daily balance but for some reason people think it outrageous that a credit card should charge interest on the daily balance.

but there you go

Lolmf

I get you should pay interest on what you owe, but I dont owe what I have already paid them !!

CLAPTON

Lolmf wrote: »

I get you should pay interest on what you owe, but I dont owe what I have already paid them !!

no, as I've already said twice, you were charged on your DAILY balance;
when the balance reduced by your payment you were charged less daily interest as your debt was less.

that is, you were charged at the daily rate ONLY while you had the debt.

exactly as you would be credited interest on a saving account... on the DAILY balance;
not the balance at the beginning of the month nor the balance at the end of the month but on the DAILY balance