Caught out by Residual Interest!

Vonnyd

So foolishly I did not know that my Tesco CC applied residual interest and last month I paid off £613 of my £676 balance and this month found a tenners worth of interest.

I normally pay off the full balance but I made a mistake and now I'm paying for it! I had thought that interest accrued on the balance that you don't pay (and it would have applied to £56 and not the WHOLE balance and not accounting for the payment I made) but I was wrong. And I'm going to get stung on my next statement I'm told. I have paid the lot off now so it doesn't accrue further.

This is the first time it's happened to me and I'm not happy so I'm looking to find another credit card that doesn't charge RI. Does anyone know which ones will charge interest on unpaid balances rather than the whole lot?

Thanks all
Von

[Deleted User]

All cards charge interest the same way - on the daily balance until paid off. It's only waived if you pay in full each month.

chattychappy

Yep, I'm afraid they all work this way (as far as I know). Interest calculated on the daily balance and only not applied if you pay in full. So pay 1p short of the full balance and you are hit by the "backlog" of interest.

If you can only pay just short of the full balance, it can actually be worth taking a cash advance for the shortfall just so you can pay off the full balance. True you'll get interest on the cash advance and perhaps a fee, but this can work out at less than the interest gotcha that you faced. You have to do the maths with the specifics to work it out.

But full credit to you for not using !!!! and claiming it's a scandal. BTW you'll probably get a small amount of residual interest next month too, so look out for that.

marvin

Now I have always thought this but when I have cleared balances recently (last year or so) where I was paying interest no residual interest has accrued.

I recently paid off a Cap1 account which has had a balance on it for a very long time charging a very low rate. I asked when closing the account if all was paid off was there any residual interest to pay and they said no.

I remain confused by it as others do seem to be getting residual interest.

Hominu

Some card providers will waive the RI for one time only. I don't know of any card providers which don't do it at all, but you can easily find out if the card provider will charge it before applying by reading the terms and conditions.

d70cw6

Being charged interest on just the unpaid balance is a common misconception which many people (including myself) have fallen foul to at some point.

It's not particularly intuitive, but:
- once stung twice shy,
- you live and learn,
- a bird in the hand is worth two in the bush

...and other such meaningless pithy statements come to mind.

james_joyce

It seems to get very complicated when you pay off the full balance having not done so in the previous months. With MBNA, I did that and my next statement had interest for that final month. Not sure if it's about the ts & cs of each card company, ie whether you have to pay in full by the 'due date' rather than just the 'next statement' date.

CLAPTON

they charge you interest based on your daily balance

exactly as you would be paid interest on your savings : based on your daily balance and not the end of month balance

james_joyce

CLAPTON wrote: »

they charge you interest based on your daily balance

exactly as you would be paid interest on your savings : based on your daily balance and not the end of month balance

But as mentioned by others, there is meant to be no interest if you pay off in full, ie the 'average balance' rule shouldn't apply - it didn't when I paid off a Barclaycard but it did with MBNA. Hopefully it was simply that I missed the due date with MBNA, ie if you hit the due date then you do avoid the interest.

CLAPTON

james_joyce wrote: »

But as mentioned by others, there is meant to be no interest if you pay off in full, ie the 'average balance' rule shouldn't apply - it didn't when I paid off a Barclaycard but it did with MBNA. Hopefully it was simply that I missed the due date with MBNA, ie if you hit the due date then you do avoid the interest.

are you saying that because you have read and understood the T&Cs of both cards ?

Fruit_and_Nut_Case

Deleted_User wrote: »

All cards charge interest the same way...

Yes. Someone was complaining just last Monday about their M&S card doing the same thing.