Interest Charged Greater than Minimum Payment

mmm123

Hi, I wonder if anyone can tell me if this is 'legal' or not. I have a credit card account with Alliance and Leicester. I have a direct debit set up to take the minimum payment monthly although I do make ad-hoc payments over and above this. When I got my last statement the amount of interest added to the account was more than the amount of the monthly direct debit they had taken. As A&L set the amount for the minimum payment I am at a loss to understand why they are allowed to take less than they have even charged me in interest! This has never happened before but customer services simply did not seem to have an explanation.

Also, the amount of interest I added was more than the interest the previous month even though the balance had reduced. I was told this was because there were 2 extra days in the month compared with last month, however, as the additional interest was £21 on a balance of £8,000 this seems very excessive for 2 days , even at the extortionate rate of interest they are charging.

Needless to say I am going to transfer the balance elsewhere!

Any thoughts anyone??

tom188

Cant see any reason for it to be "illegal", though whether or not it is in either yours or MBNAs best interest is another matter.

youknowwho

For example if ur min payment is 2% and your apr is higher than about 26% (i think) then this will make a minimum payment less than interest charged. The reason will just be that you have had your rates incresed at some point which has made it go higher than minimum amount. It would cost the bank loads of money, time and effort to increse minimum paymenst to meet ur interest. Just carry on payin more as u r doin. But basically it would just cost the bank to amend this.

jamalfatty

With regards to your first question, you've got things slightly mixed up, the direct debit payment that has gone out has covered last months statement - not the one you have just received. If you check your previous statement you should find the interest is less than the DD that has just gone out.

As for £21 interest in 2 days, on a balance of £8k, this works out at an APR of approx 60%! Assuming your APR isnt this so either there is more than a 2 day gap, or you/they have missed something