📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!

Credit Card Interest Query

Options
My credit card statement dated 6 October carried a balance of £1241.52, consisting entirely of purchases made since the previous statement (balance was zero on the statement prior to this). The statement indicated that the amount of interest I'd incur if only making the minimum payment (£25 - which is what I intended to pay because it's been a particularly heavy month) would be £28.28. This struck me as being fairly high, and so I fired up the calculator and started thrashing some numbers around - admittedly without really knowing the formula that should be applied.

My APR for purchases is 15.9% and for cash withdrawals is 27.9%. Interestingly, when I did the sum (((£1241.52 - 25) x 27.9%) / 12) I arrived at the figure £28.28. I came to the uneducated conclusion, therefore, that they'd applied the cash interest APR amount despite all of the transactions being purchases.

I sent an email off to the card provider (Nationwide) but that was over 3 weeks ago and no reply. I phoned them and they said that the APR they've applied is definitely 15.9% but when I asked them to confirm how the amount of £28.28 had been derived they couldn't because "it's all done automatically and nobody here has the knowledge"! Clearly I wasn't happy with that response, and despite referral to a supervisor, who couldn't tell me what the calculation is but did say that it was very complicated and the way I'd done it was not correct, I left without my query being satisfactorily answered.

I have, today, received a further statement, and (remarkably) the estimated interest if I make only the minimum payment this month is £15.13, nearly half that of the previous month despite my balance having increased to £1244.80 (due to having incurred interest that was higher than the payment I made).

I will certainly be looking into transferring the balance to a 0% card, but, in the meantime, I was wondering if there are any savvy MSE forumites out there who could advise me whether Nationwide have made a mistake with my previous months interest calculation?

Comments

  • [Deleted User]
    [Deleted User] Posts: 35,242 Forumite
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    The interest is not estimated on a straight month, it's from transaction date to next statement date - so could be up to two months.
  • Tixy
    Tixy Posts: 31,455 Forumite
    You have calculated the interest based on a month or 1/12 of a year, whereas their estimated interest will be based on the daily balance from the each transaction date right through to the following statement, which is very likely more than a month and could be up to say 8weeks.

    On the new statement the estimated interest charge will be just from this statement date to the next statement date.
    A smile enriches those who receive without making poorer those who give
    or "It costs nowt to be nice"
  • grumbler
    grumbler Posts: 58,629 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    The interest is not estimated on a straight month, it's from transaction date to next statement date - so could be up to two months.
    How come? The interest up to the last statement date has been already added. So, for the statement balance the next interest can't be for more than for 30-31 days.
  • grumbler wrote: »
    How come? The interest up to the last statement date has been already added. So, for the statement balance the next interest can't be for more than for 30-31 days.
    The OP said "balance was zero on the statement prior to this".
  • grumbler
    grumbler Posts: 58,629 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Ah... I see.
    So, to clarify, the interest for this month hasn't been added yet, but will be added on the next statement date if the OP doesn't pay the current statement balance in full.
  • SnowTiger
    SnowTiger Posts: 4,461 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Photogenic
    LoidPhil wrote: »
    My credit card statement dated 6 October carried a balance of £1241.52, consisting entirely of purchases made since the previous statement (balance was zero on the statement prior to this). The statement indicated that the amount of interest I'd incur if only making the minimum payment (£25 - which is what I intended to pay because it's been a particularly heavy month) would be £28.28.

    [...]

    I have, today, received a further statement, and (remarkably) the estimated interest if I make only the minimum payment this month is £15.13, nearly half that of the previous month despite my balance having increased to £1244.80 (due to having incurred interest that was higher than the payment I made).

    Yes, that's the way it works.

    If you don't pay your statement balance in full you're charged interested on purchases from the day the purchase hits their system.

    Therefore, the interest you pay after the first month will cover two months and will be approximately twice the interest in future months.

    There are lots of things to consider in the calculation. Interest rate, purchase date, payment date, new purchases...

    Also, as interest is charged daily, you can save money by paying towards your outstanding balance as early as possible. Even paying off small amounts throughout the month, as and when you can, can lead to a significant reduction in the interest you pay.
This discussion has been closed.
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 351.2K Banking & Borrowing
  • 253.2K Reduce Debt & Boost Income
  • 453.7K Spending & Discounts
  • 244.1K Work, Benefits & Business
  • 599.2K Mortgages, Homes & Bills
  • 177K Life & Family
  • 257.6K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16.1K Discuss & Feedback
  • 37.6K Read-Only Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.