Caught out by Residual Interest!

james_joyce

CLAPTON wrote: »

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

Good point. I will check them both.

Can it ever happen where the residual interest on a statement, is more than the resulting minimum payment? Eg if you paid off £900 of last month's £1000 balance, the interest might be say £20 but the new minimum payment on the remaining balance might only be £3. I imagine that's another per-card T and Cs job.

Mr_Goodkat

Over the last six months I have cleared a number of credit cards in full and only MBNA charged residual interest:

Barclaycard Gold - £2.3k - no residual interest
Barclaycard Platinum - £2.3k - no residual interest
MBNA Platinum - £3k - residual interest circa £50
Halifax MasterCard - £5k - no residual interest

I was expecting it on each card so pleasantly surprised when not charged it on three of the four cleared cards.

planteria

Vonnyd wrote: »

I have paid the lot off now so it doesn't accrue further.

good news Von.

people are often surprised by the way this works.

as chattychappy says, may even be worth taking a cash advance. the point here is: do whatever is necessary to clear in full. beg/borrow from elsewhere if necessary. i have a £7900 balance on a statement generated on the 1st, due by 15th. as it stands, i won't quite have enough to clear it in full....but will dip/borrow to ensure that i do, or pay interest on the full amount.

the only other thought is that, if a cardholder can foresee a problem of this kind looming, and there is time....use any spare cash to reduce the balance before the statement is produced.

chattychappy

I've also had the situation where I haven't been charged residual interest despite expecting it.

I can only assume that some CCs decide not to apply it just to avoid the expense of a ballyhoo over what it is generally a small amount. Or they just have a more generous interpretation of the T+Cs, especially where the T+Cs do not make it clear either way.

Chris2000

Mr_Goodkat wrote: »

Halifax MasterCard - £5k - no residual interest

Halifax Clarity card charged me residual interest on a cash advance last year.

After paying the balance in full, which included an overseas cash advance, they charged 99p interest the next month.

After paying the 99p by direct debit they charged a further 1p interest the next month.

After paying the 1p by direct debit, the residual interest stopped.

I can understand why some card providers would program their computers to waive small amounts of residual interest especially if there are no other transactions in the month. A paper bill and a direct debit to collect 1p!

jonesMUFCforever

Chris2000 wrote: »

Halifax Clarity card charged me residual interest on a cash advance last year.

After paying the balance in full, which included an overseas cash advance, they charged 99p interest the next month.

After paying the 99p by direct debit they charged a further 1p interest the next month.

After paying the 1p by direct debit, the residual interest stopped.

I can understand why some card providers would program their computers to waive small amounts of residual interest especially if there are no other transactions in the month. A paper bill and a direct debit to collect 1p!

I think the present system works well - the alternative which some cards tried (don't know if they still operate this way) was to have a minimum interest charge of a £1 per month even if you only owed a penny.

katejo

chattychappy wrote: »

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.

I always thought that they charged on the whole amount too but I was surprised to read the following on my Nectar Sainsburys statement "interest is charged on the whole balance shown on your statement until you make a payment. After that payment registers on your account you will be charged the interest on any balance which still remains".
This appears to contradict the usual rule. I usually pay my full balance off anyway so don't pay a lot of attention to the policy but just noticed this by chance.

chattychappy

katejo wrote: »

I always thought that they charged on the whole amount too but I was surprised to read the following on my Nectar Sainsburys statement "interest is charged on the whole balance shown on your statement until you make a payment. After that payment registers on your account you will be charged the interest on any balance which still remains".
This appears to contradict the usual rule. I usually pay my full balance off anyway so don't pay a lot of attention to the policy but just noticed this by chance.

Worth checking the Summary Box/T+Cs. I don't know which card you have, but the "Nectar Low Rate Card says":

We charge you interest on all transactions from the date we first charge the amount to your account. However, if you pay your total balance in full and on time each month, you will not be charged interest on purchases. If you do not pay the total balance shown on your statement each month, we will add the interest charged to your next statement balance.

https://www.sainsburyscreditcardapp.co.uk/ApplyFactoryCards/SummaryBox.aspx?SourceCode=YB935GWM3

I think the wording you quote is not totally clear on this point.

londonTiger

I wonder how many people get caught out with non payment fees because they don't have dd set up and assume that since they haven't used the card in over a month and they've just cleared the balance they shouldn't be getting fees

Scarpacci

katejo wrote: »

I always thought that they charged on the whole amount too but I was surprised to read the following on my Nectar Sainsburys statement "interest is charged on the whole balance shown on your statement until you make a payment. After that payment registers on your account you will be charged the interest on any balance which still remains".
This appears to contradict the usual rule. I usually pay my full balance off anyway so don't pay a lot of attention to the policy but just noticed this by chance.

I don't think that does contradict the usual rule. I think they mean once a payment has been made, no further interest will be accrued on that paid balance - not that accrued interest won't be charged on that balance. That would be how all cards work, since not even the credit card companies would be charging interest on money no longer borrowed.