NatWest: Direct debit takes payment 10 days before due date

freeganneist

I pay the full amount on my NatWest credit card by direct debit every month. Natwest take the money from my current account ten days before the payment due date, and despite speaking to several members of NatWest staff I haven't received an explanation of why they do this, other than a) they've always done it and b) it was in the small print when I agreed to it over 20 years ago. I'm told that if I wish to pay manually (e.g. transferring it as an electronic transaction) I can do it on the payment due date without incurring any penalty or interest. I'd prefer not to do that in case I accidentally miss a payment and mess up my credit rating.

I know it doesn't take ten days for a direct debit to reach NatWest, so I know they have the use of that money much earlier than they would if I transferred the money to them on the real payment date. Their complaints department deny this and say it makes no difference to them financially if they receive it by direct debit or if it's paid ten days later - even if this is happening with tens of thousands of customers. I truly don't believe that.

Have there been any previous discussion on this, or any consumer action that anyone's aware of? It strikes me that it's similar to the PPI scandal, if tens of thousands (or more) customers have been debited earlier than necessary, over a long period of time - even if it did say so in the small print. I had a quick look back at this forum but it's hard to find older threads without knowing what to search for.

OllyM

Lots of credit cards (e.g. Amex, Capital One, Tesco Bank) do this if you set up a full balance DD. I guess they feel you're very unlikely to ever pay any interest so it's just a way of clawing something back and to be fair they are lending you money for up to 7-8 weeks without charging you anything!

If it really bothers you, why not set up a minimum payment direct debit (so you can't forget) which they will take on the due date and pay the remaining balance manually?

[Deleted User]

I'd imagine, given the shoddy state of Natwest's systems, that it is set this early to allow the time to recover when it doesn't go through properly first time.

Otherwise, the system would deem everyone's payments late, spit out late fees and they would then need to go through and reverse all these.

Probably the best advice is to use a better bank until they sort their systems out.

freeganneist

Financial sites like MSE always recommend setting up a DD to pay off the full amount, if you can afford it, but they don't mention the loss of interest to you if you have to pay 10 days earlier. I find that surprising.

I take your point that my credit rating won't suffer if I make a minimum payment and then forget to pay the rest manually; thank you for that suggestion. I would risk having to pay interest though, if I forget.

Banks charge fees to retailers; they're earning money per transaction, and that part of their income isn't affected by whether we pay in full or not. They also don't settle up with retailers immediately, so they're not losing money if people pay their account in full every month. They may not earn as much from customers who don't pay interest, but they do still earn money on our payments before they have to pass it on to the retailers. But, despite what they're making from us, there's no excuse for the disparity in payment dates between people who pay by direct debit and those who don't.

OllyM

If it bothers you that much, switch to a different credit card company that doesn't do this, e.g. Barclaycard, Lloyds Bank, Halifax.

freeganneist

OllyM wrote: »

If it bothers you that much, switch to a different credit card company that doesn't do this, e.g. Barclaycard, Lloyds Bank, Halifax.

It bothers me because, like PPI, this is affecting a very large number of people who may not be aware that they're being ripped off. Some banks didn't rip off their customers by misselling PPI, some did. If the banks who're doing this have been making large amounts of money off unsuspecting customers, for a long period of time, it's worth highlighting, if nothing else. I'm surprised there hasn't been a campaign about it.

jonesMUFCforever

Freeganniest I think you are confusing things here.
Direct debits might well be PREPARED 10 days in advance of being taken from your account but until it actually debits your account any interest you accrue on your current account is unaffected.

andyuk01

freeganneist wrote: »

It bothers me because, like PPI, this is affecting a very large number of people who may not be aware that they're being ripped off. Some banks didn't rip off their customers by misselling PPI, some did. If the banks who're doing this have been making large amounts of money off unsuspecting customers, for a long period of time, it's worth highlighting, if nothing else. I'm surprised there hasn't been a campaign about it.

Just out of curiosity how much interest do you believe you are losing by having the payment taken a few days earlier than you expect and is this more/less than the interest you are earning by using a cc in the first place and sitting on the money for the interest free period?

opinions4u

freeganneist wrote: »

This makes me wonder if you work for NatWest

I don't.

You've got a bee in your bonnet over a complete non-issue though.

this is affecting a very large number of people who may not be aware that they're being ripped off.

Those customers who pay interest will save money because of the earlier direct debit collection date. If they collected ten days later those customers would be charged more in interest and somebody else would be on here spouting scam or rip off because a different bank collects earlier.

The amount of "lost interest" on a savings account would be about 16p a month after tax on a £500 balance. Double it for a 3% current account.

On a credit card with an interest rate of 20% where the customer takes advantage of 30 days interest free credit the card company is forgoing around £8 a month in interest that would have been charged if they didn't offer the interest free facility.

zerog

Would you prefer that they shift the due date forward by 10 days??

bigadaj

I can't believe you've all missed the point here, the bank is doing something that the OP disagrees with and he deserves some compensation, haven't you all learnt that banks are always wrong now?