'Total Charge for Credit' confusion!

Ezrolith

Hello all,

It is my first post here and it's a really helpful and usefull site and i'm very glad I found it.

Now, to cut to the chase.

I have just been FINALLY approved for my first ever credit card. The Capital One Classic effective APR 34.94% etc.

I have received the credit agreement in the post today, to reply to but on the front page it says:

Total Charge for Credit
At the time of the agreement is £257.78
Comprising interest in the sum of: £257.78



Now, on another part of the agreement it makes it clear the annual fee is £0 so I can't understand what this £257.78 is. I have googled the term and a few people seem to think it is some Capital One scamming you out of £260 at the start of the agreement as some kind of charge but I can't see that being true.

I assume it is some kind of 'potential' maximum interest charged... or something? However they havn't even stated my credit limit yet!!

Can anyone explain what this is to me so I can reply to the credit card it has took me three years to get! I would appreciate any help from anyone who knows what they're talking about :-D

Thank you v.m.

YorkshireBoy

Ezrolith wrote: »

Can anyone explain what this is to me...

Capital One explain it in section 11 of the T&C's...

In calculating the APR and Total Charge for Credit we are required by law to assume that:

• the credit limit will be £1,500 unless we know the credit limit when this agreement is made, in which case we will use that credit limit;
• the credit is provided for a period of one year beginning with the date of the agreement;
• the rate of interest payable in relation to the whole of the credit under this agreement is that applying to purchases;
• and that the credit is repaid in twelve equal monthly instalments, beginning one month after the date of this agreement.

All credit cards have this term. It's simply a way for you to compare products on a like-for-like basis, and is an example only.

Ezrolith

YorkshireBoy wrote: »

Capital One explain it in section 11 of the T&C's...All credit cards have this term. It's simply a way for you to compare products on a like-for-like basis, and is an example only.

Thanks alot for your reply! I thought that too but 30% of £1500 isn't £257.78 so i'm still confused! But if it's just some dodgy calculation by them I'm happy with them as long as it isn't an upfront fee!

YorkshireBoy

Ezrolith wrote: »

I thought that too but 30% of £1500 isn't £257.78 so i'm still confused!

It doesn't work like that! Don't forget that you're repaying a twelfth of, in the example above, the starting balance of £1,500, each month so there's less (34.9%) interest accruing with each month that passes.

But if it's just some dodgy calculation by them I'm happy with them as long as it isn't an upfront fee!

Any upfront fee would be made very clear in your offer/credit agreement doc's.

Ezrolith

Thank you very much YorkshireBoy :-D

With my new understanding, when I re-read the contract it makes alot more sense. I really appreciate you're help! :-D