Daily Interest Question

Drebin911

Good Morning Money Savers!

I have a quick question on my maths skills

I foolishly made a deposit on a 'gambling' website with my credit card, and have had to swallow the fees and a hard lesson has been learnt....

I have been charged a Cash Fee of 2.5% as they treat this as a cash withdrawal.

They charge 27.9% APR interest.

I deposited £600.

Is this the correct formula for working out what is owed?

£600 x 27.9% = £167.40
£167.40 / 365 (daily rate) = 0.4586 (rounded to 0.46p)
£0.46 x 5 days = £2.30

I would appreciate if anyone could point out any mistakes or give me the correct amount.

PS - It goes without saying, I made a mistake, and No - I am not a gambling addict ;-D

Cheers

Joe

HappyMJ

They might count the days processing the payment to calculate the interest so it might not be 5 days.

If you are making a payment to clear it then I'd pay an extra £15 to cover the fee and an extra £10 to cover any potential interest.

Drebin911

Hey HappyMJ

Thanks for replying

Have just got off the phone, I have paid off the debt and fee, the interest will not be able to be paid until the statement is produced on the 11th October.

And I've already got the Direct Debit in place.

But yeah, good shout on the interest building up while the payment clears!

Cheers

J

chattychappy

Joe_Cocaine wrote: »

Hey HappyMJ

Thanks for replying

Have just got off the phone, I have paid off the debt and fee, the interest will not be able to be paid until the statement is produced on the 11th October.

And I've already got the Direct Debit in place.

But yeah, good shout on the interest building up while the payment clears!

Cheers

J

This may not work. If you have an existing purchase balance on a previous statement waiting for that DD, then the payment you just made will be applied to those purchases first.

My suggestion is that you clear the entire currently showing balance now. I wouldn't add anything to cover interest not yet applied for two reasons: 1) technically you would be putting the CC into credit which is not allowed and could theoretically cause a further problem, and 2) the amount involved would be small (that is to say, the "extra" interest/interest on interest).

Depending on timing and the CC, the DD might be taken anyway - so be prepared for this. If the DD has already been taken in respect of the previous statement balance, then indeed the payment you just made should be applied to the gambling transaction first - though again, this "depends" a bit too.

Drebin911

chattychappy wrote: »

This may not work. If you have an existing purchase balance on a previous statement waiting for that DD, then the payment you just made will be applied to those purchases first.

My suggestion is that you clear the entire currently showing balance now. I wouldn't add anything to cover interest not yet applied for two reasons: 1) technically you would be putting the CC into credit which is not allowed and could theoretically cause a further problem, and 2) the amount involved would be small (that is to say, the "extra" interest/interest on interest).

Depending on timing and the CC, the DD might be taken anyway - so be prepared for this. If the DD has already been taken in respect of the previous statement balance, then indeed the payment you just made should be applied to the gambling transaction first - though again, this "depends" a bit too.

Hey Chatty,

As advised by the customer service agent on the phone, I cleared the entire £615.00 (£600 cash davance, and £15.00 in fee's).

I have a Direct Debit set up for £50.00 PCM which will not be taken until 11th November I believe.

This should more than cover the interest which has accrued, and will knock some off any other purchases!!

Do you believe this to be correct? in that the interest will clear first ? as opposed to any new purchases (which should accrue No interest, as 0%).

Thanks

PS - Sorry for any Jargon, quite new to all of this.

Joe

HappyMJ

Joe_Cocaine wrote: »

Hey Chatty,

As advised by the customer service agent on the phone, I cleared the entire £615.00 (£600 cash davance, and £15.00 in fee's).

I have a Direct Debit set up for £50.00 PCM which will not be taken until 11th November I believe.

This should more than cover the interest which has accrued, and will knock some off any other purchases!!

Do you believe this to be correct? in that the interest will clear first ? as opposed to any new purchases (which should accrue to interest, as 0%).

Thanks

PS - Sorry for any Jargon, quite new to all of this.

Joe

The payment "may" go towards the interest free purchases rather than the cash advance. If you can clear the whole current balance then clear it.

Don't worry about going into credit it's against the T's and C's but a small amount in credit no bank will worry about. They don't want people going thousands into credit and using it as a place to stash cash. Once you get a statement showing a credit balance always spend it before the end of that month.

The interest appears as a purchase on your next statement and if that is cleared in full there should be no trailing interest the following month....but...not with every card.

chattychappy

Oh... looks like you are running a purchase balance? Ie you are on a 0% purchase deal and not paying off in full?

In that case, I can understand you wouldn't want to pay off the entire balance right now.

Because of this, until your gambling transaction appears on a statement, you cannot pay it off. Any money you send (sent) would go to previously statemented purchases (assuming you have that many).

Not enough information from your posts.

1) what was the balance on the statement prior to your gambing transaction? What was the date of that statement?

2) what payments were made between the statement date and the gambling transaction?

3) when was the gambling transaction?

4) what payments have you made since the gambling transaction and when?

5) have you received a further statement? when is it dated? does it show the gambling transaction?

The advice given by the rep might have been wrong.

YorkshireBoy

Joe_Cocaine wrote: »

I deposited £600.

I am not a gambling addict

That's one hell of a one-off bet if you're not! I didn't bet much more than that on Lloyds a few years ago. I've since trebled my money...how did you do?

Is this the correct formula for working out what is owed?

£600 x 27.9% = £167.40
£167.40 / 365 (daily rate) = 0.4586 (rounded to 0.46p)
£0.46 x 5 days = £2.30

I would appreciate if anyone could point out any mistakes or give me the correct amount.

You can't use the APR (as that includes compounding*). You need to use the annual non-compounded rate, which is monthly rate x 12 / 365, so your correct calculation is:

£600 x (2.0718 x 12 / 365) = £0.4087

Which gives a 5 day figure of £2.04


* For clarity, I've assumed the 5 days does not span a statement date.

grumbler

YorkshireBoy wrote: »

That's one hell of a one-off bet if you're not!

Not all people depositing big (and small) amounts to gambling websites are addicts. Have you ever heard of 'advantage playing' in general and 'matched betting' in particular?

YorkshireBoy

grumbler wrote: »

Not all people depositing big (and small) amounts to gambling websites are addicts. Have you ever heard of 'advantage playing' in general and 'matched betting' in particular?

Yes I have, but thought those exploiting it were more financially savvy than to make their deposits with a credit card (no offence OP!).