Interest on Interest

alisterbain

I withdrew cash from my Visa card abroad.
My card issuer charge me interest on that withdrawal from the date of the withdrawal - no problem with that.
I have a direct debit to clear my outstanding balance in full each month. However because there is a 14ish day gap between Visa calculating my outstanding balance and my direct debit paying that amount, interest continues to accrue on the cash withdrawal. This means that my balance is not totally cleared so next month I am charged more interest on the withdrawal BUT I AM NOW CHARGED INTEREST ON THE INTEREST!!!
Surely that is plain wrong.
I have taken it up with Visa who say that it is explained in their terms on the reverse of my statement and that I should read that (my life is not yet that sad). They have refunded the interest.
How can they justify charging interest on interest??:mad:

CLAPTON

you are being charged interest on the daily balance of your card from the date you withdraw to the date you choose to repay;

the statement shows the interest up to the date of the statement and not the date you choose to pay .

you can choose to pay early before the statement arrives or you can overpay the statement balance to include the extra interest

this is plainly reasonable that you are charged on your daily balance :

meer53

They justify it by explaining it in their terms on the reverse of your statement.

You might lead an exciting life, but sometimes it pays to read things. Especially if they are going to cost you. At least you know not to use a Visa card for cash withdrawals if you can help it, so you won't be charged again will you ?

Hominu

That seems a bit foolish... "I don't read terms and conditions as my life is not that sad, I just agree to them", then you get burned and complain both over the phone and on an internet forum.

Meanwhile, other people read the T&Cs before signing and know exactly what will be charged where and so don't need to complain.

Alternatively, the time you spent complaining to Visa and posting on here would have been better spent reading the T&Cs, then neither of the later would be required.

Personally, I prefer to know what I'm legally agreeing to.

grumbler

alisterbain wrote: »

...This means ... I AM NOW CHARGED INTEREST ON THE INTEREST!!!
Surely that is plain wrong.

Surely?! What's wrong with changing interest on the interest after is was added to your balance? This is the way any interest works - for credit and for savings. This is called compounding.

And, BTW, Visa is just a payments processing system. They have nothing to do with interest you pay to your CC provider.

unimaginative_user_name

Hi Alastair. I think all credit cards works like that. Before you go abroad next time, get one of the credit cards that charges no fees (like Halifax Clarity) and use that to withdraw money. Sign up for Internet banking and check your account regularly until the transaction appears then make a manual payment. You may have to pay a few pence in interest but if you pay it back before the statement date there won't be trailing interest ( interest on interest) the following month. I did this in Portugal and on withdrawals totalling €150 I paid 31p in interest and no ATM transaction charges. I would have paid less if I hadn't waited until I got back to pay for the transactions.

opinions4u

I have taken it up with Visa who say that it is explained in their terms on the reverse of my statement and that I should read that (my life is not yet that sad)

Well it's tough then, innit.

Own fault.

Next, please.

zagfles

It's normal but the interest on the interest will be trivial if you pay in full every month, so not worth getting wound up about. It'll be a few pence probably.

Gromitt

If you paid off the withdrawal on the day it would have been zero or pence in interest. At least pay it when you receive the statement rather than waiting another 20-odd days for more interest to accumulate.

Oh yes, you didn't know that as only sad people read exactly how there credit card works.