Credit card interest on zero balance??

leopold

Okay, I've got a weird one here, which I hope someone can answer as I can't get my head around it.

I was recently offered a loan by my bank at a better rate of interest than all of my credit cards could offer, at a monthly repayment which was identical to what I was paying them off at. Naturally, I took it (why should the banks get more of my money than necessary, right?) and used it to pay off the cards. After the payments were made, I double-checked both accounts, both showed a nice balance of zero pounds and zero pence and well before the payment due date. Nice!

However, I was checking one of my bank accounts today online and, just as I was about to log out, I noticed an outstanding balance linked to my credit card. I had a look and for some reason they've charged me £6.80 in interest. On a zero balance? Most odd. So I checked the other card online (an account I've no other reason to log on to) and, sure enough, that's got interest on it as well.

My grievance here, aside from being charged interest on fresh air, is that if I'd not checked, I'd have missed a payment, been charged a fee, charged more interest, and so on and so forth, until they'd feel compelled to write to me about why I was ignoring this outstanding debt.

Am I being unreasonable to think that, because I'd paid the balances off in full, I could expect to ignore them forever because there's nothing left to pay off on them? Would I also be right to get this interest overturned on the basis that I'd paid the debt?

I've written complaints to both banks, but if anyone's got any advice or experience on this, I'd be grateful

LuSiVe

Probably trailing interest?

That is, interest charged between the statement date and when you paid the card off. Unless you pay them off every month, there will always be interest for a month after you've cleared the balance.

geekonthepc

More than likely interest that had previously been accrued but not charged for (interest is calculated daily and is payable until the entire balance is clear, but will only be added to your bill once a month).

You can call your CC companies and get them to clarify that, but you'll still have to pay it if that's what it is.

The_Boss

Can't really add to the previous two replies, which are probably the reason.

When did your 0% deal on the two accounts end?

chattychappy

leopold wrote: »

I had a look and for some reason they've charged me £6.80 in interest. On a zero balance? Most odd.

As per the posts above, it wasn't on a zero balance. A statement was generated and interest was calculated up to the statement date. You didn't pay on the statement date - you paid some days later during which time there was a non-zero balance. So interest was still accruing. The next statement shows this interest and this is probably what you saw. That should be the end of it. Nothing odd.

Since you paid the statement balance in full, most CCs don't apply further accrued interest (interest on interest) so that should be the end of it. But you should check anyway - particularly if the balance wasn't in respect of purchases.

leopold wrote: »

My grievance here, aside from being charged interest on fresh air,

But it wasn't. It was on money you owed for the time you owed it.

leopold wrote: »

is that if I'd not checked, I'd have missed a payment, been charged a fee, charged more interest, and so on and so forth, until they'd feel compelled to write to me about why I was ignoring this outstanding debt.

Well you would have done, because money was still owed and by not making the payments you would have been breaching the T+Cs. Whilst the account is open you should check your statements anyway. You would have been wrong to assume the balance had returned to zero. Indeed CCs generally make it part of the T+Cs that you check your statements, if nothing else to catch fraud at an early stage. Among other reasons, that's why dormant accounts eventually get closed. People don't check statements and they are a fraud risk.

leopold

So basically, what you're all saying is they're charging interest daily on outstanding balances, and that interest accrues from the statement date even if the final balance is paid off before the payment due date.

It's no wonder banks make so much money. I'm in the wrong job...

LuSiVe

While you owe them money, they charge interest.

You only get an interest free period once you are paying off the balance every single month.

[Deleted User]

leopold wrote: »

It's no wonder banks make so much money. I'm in the wrong job...

Wouldn't you charge interest to people who owed you money if you ran a bank?

chattychappy

Deleted_User wrote: »

Wouldn't you charge interest to people who owed you money if you ran a bank?

That's why it's only the nasty bankers that run banks!

CLAPTON

leopold wrote: »

So basically, what you're all saying is they're charging interest daily on outstanding balances, and that interest accrues from the statement date even if the final balance is paid off before the payment due date.

It's no wonder banks make so much money. I'm in the wrong job...

Suppose you had an ordinary savings account that pays interest yearly.

And say you had 1000 for 11 months and then withdrew 1000.

After the full 12 months would you expect to have
-interest of zero as your balance is zero
-the accumulated interest for the 11 months you had a 1,000 balance?

pqrdef

One of these days, trailing interest will be banned and they'll be told they've got to accept full settlement by the due date as if it were paid on the statement date, like everybody else.

But dragging the banks into the real world is a long hard job.