Interest on MBNA/Vrign Atlantic AMEX

Dirk_Gently_2

I've discovered something interesting this morning (at least I think it's interesting...) about the way MBNA charge interest on credit cards, and it flies completely in the face of everything I thought I understood about this.

In my naivety, I thought it was a golden rule of credit cards that if you paid off the full balance showing on the statement, you'd not pay any interest. But apparently this isn't the case ...

It makes very little sense to me the way it was explained by a lady at customer services today, but for some reason to avoid incurring any interest you not only need to pay off the full statement amount to incur no interest - but you also need to have done that the month before!

Weird, but apparently that's the way it works - and she is "unable to comment on the way other card companies work."

Just to confuse matters, it also turns out that if you have a sum not subject to interest (let's say £3000) because of a balance transfer offer, and also a sum for purchases (say £60), a payment of £1000 (i.e. £60 to settle the purchases and £940 reducing the balance transfer capital) won't stop you paying interest on the purchase sum.

MBNA's rationale on this is that you've not paid the full statement balance, and even though the payment is allocated first to pay off the £60 (purchases) in full this still attracts interest because you've not paid off 100% of the BT sum.

This strikes me is illogical, far too complicated and verging on chicanery. Has anyone else come across this, or do any other cards work in a similar way?

[Deleted User]

Yup - same on all cards.

Meadows

I think they all work the same, if you pay in full each month then no interest, if the month before you don't pay in full then interest is charged and can still incur interest after the next statement is issued until the amounts owed are cleared (even when you have a statement you will still be owing interest on all unpaid parts until all the balance is cleared).

Cycrow

i thought this was pretty common knowledge?

Dirk_Gently_2

I must have been wrong all these years, then.

I thought that if you if you paid off the full balance showing on the statement, you'd not pay any interest - full stop. My underlying assumption was that as any interest for the previous month had been charged on that month's statement, how could if affect what happens in the following charging period?

But if I'm wrong, I'm wrong .... thanks for the input, guys.


Oh, sorry, this is the internet, isn't it? Shouldn't I now go on endlessly claiming I'm right in the face of overwhelming evidence to the contrary, whilst slinging insult at everyone who disagrees with me.....?

[Deleted User]

Dirk_Gently wrote: »

My underlying assumption was that as any interest for the previous month had been charged on that month's statement, how could if affect what happens in the following charging period?

The interest on the previous statement only goes up to the date the statement is produced. If a customer then takes another 3 weeks to pay, there is more interest.

This is what you then see on the next statement.

StuC75

Yep sounds perfectly correct to me..

Trailing interest if not fully repaid from one to the next..

Further purchases not interest free if there a Balance Transfer (on a deal) since it isn't paying the previous balance in full.. That why they try to tempt you with BT offers when you normally pay in full.. And that is why never mix regular purchases and BT's on the same card..

Cycrow

i believe the interest is only waived on purchases if the previous balance was cleared in full.

so, if there was any balance left, then any new purchases will have interest on them from day one.

if you then dont clear the following balance in full, then that waived interest will then be added.

effectually needing 2 months of full payments for no interest

Dirk_Gently_2

Cycrow wrote: »

i believe the interest is only waived on purchases if the previous balance was cleared in full.

so, if there was any balance left, then any new purchases will have interest on them from day one.

if you then dont clear the following balance in full, then that waived interest will then be added.

effectually needing 2 months of full payments for no interest

I get that, but what if the previous month 100% of the sum subject to interest was cleared - i.e. the only outstanding balance on the card was a BT sum, covered by an interest-free offer, with the balance for all purchases cleared in full?

I'm struggling to see how carrying forward an interest-free sum means you incur interest.

StuC75

Because the statement says that the Previous balance has to be paid in full.. That includes BT's; and is why its best practice to avoid carrying a BT & regular purchases on the same card for this very reason..

Dirk_Gently wrote: »

I'm struggling to see how carrying forward an interest-free sum means you incur interest.

anxs

I am thinking of getting this card, but this is putting me off now. Only want to transfer the overdraft and wouldn't use it to purchase anything on a balance transfer. Like you would think why would you have to pay anymore interest when you have paid the balance in full on your statement. Sounds crazy. Good luck with it.