Have I been wrongly charged interest here?

dn852k4

I've got a Santander 123 credit card which is interest free until May 2016.

In March I made transactions that Santander counted as "cash" transactions amounting to £2,100 and was charged £63 "Credit Quasi-cash Fee" £2,100 + £63 = £2,163.

In the same month I made payments to this card totaling £2,300.

On the back of my statement is the following: If you do not pay off your balance in full, payments we receive are applied to the highest interest bearing transactions first

In April's statement I was charged £26.48 interest. The minimum payment requested was £53.38

I was of the understanding that with me paying £2,300 off that would cover the "cash" transactions and my minimum payment and wouldn't be expecting any more interest to be applied in May's statement.

However in May's statement I was charged £28.58 interest with next month's interest estimated at £25.59. (I had paid over the min payment request in April's statement)

I haven't made any other "cash" transactions since March.
Am I being charged interest in error here?

Thanks in advance for any help.

grumbler

dn852k4 wrote: »

I've got a Santander 123 credit card which is interest free until May 2016.

It's not "interest-free".
It's 0% on purchases or on BTs or on both.

Cash transactions are almosts never interest free.

I was of the understanding that with me paying £2,300 off that would cover the "cash" transactions and my minimum payment and wouldn't be expecting any more interest to be applied in May's statement.

Generally, adding minimum payment to the balance makes no sense, although it does make sense to pay more than balance to cover the trailing interest.

However in May's statement I was charged £28.58 interest with next month's interest estimated at £25.59. (I had paid over the min payment request in April's statement)

It's the interest on your balance from the statement till the day when the payment was received.

dn852k4

I've not explained it too well here. I do realise there will be interest on cash transactions.

Cash transactions amounted to £2,163
If I paid £2,300 wouldn't that payment have gone mainly towards the cash transactions therefore preventing interest in the following month as all other transactions were purchases covered under the 0% interest.

payments we receive are applied to the highest interest bearing transactions first

dn852k4

just to clarifiy the dates
17/3/15: £600 cash transaction
19/3/15 £800 credit paid

21/3/15 £1500 cash transaction
28/3/15 £1500 credit paid

Each cash transaction was paid off no later than a week later. This is why I'm confused on why the interest was charged on April's statement and May's?

Oldfatgrumpy

I don't know your credit provider's rules but my understanding in general has been that any payments made to a balance which has a 0% interest element will be used to pay off the 0% stuff and only when the 0% debt has been cleared will any remainder of your payment go to settle the interest-gathering debts.

PeacefulWaters

This is about statements.

When you've paid the £2,300 your cash transaction is yet to appear on a monthly statement. So the funds are used to clear the balance on the most recently issued statement first, ahead of the cash transaction.

This has led to residual interest on the cash transaction between the subsequent statement being issued and payment (now prioritised against the cash transaction on that subsequent statement) being received.

SnowTiger

dn852k4 wrote: »

just to clarifiy the dates
17/3/15: £600 cash transaction
19/3/15 £800 credit paid

21/3/15 £1500 cash transaction
28/3/15 £1500 credit paid

Each cash transaction was paid off no later than a week later. This is why I'm confused on why the interest was charged on April's statement and May's?

Was the card already carrying a balance?

IIRC payments you make are allocated to items that appear on your statement first. Presumably the two cash advances didn't appear on your statement, therefore the payments were set against items that did.

123 credit card T&Cs:

Allocation of Payments

If you do not pay the Account balance in full in any month,
we will apply your payment to the statemented Transactions
as follows:

1) It will be allocated to the different amounts of your
outstanding statemented balance that are charged at higher
interest rates before those that are charged at lower interest
rates.

Presumably stalemated Transactions are ones that appear on your monthly statement.

Caz3121

Oldfatgrumpy wrote: »

I don't know your credit provider's rules but my understanding in general has been that any payments made to a balance which has a 0% interest element will be used to pay off the 0% stuff and only when the 0% debt has been cleared will any remainder of your payment go to settle the interest-gathering debts.

most if not all cards now attribute the payment to the highest % debt first

YorkshireBoy

Caz3121 wrote: »

most if not all cards now attribute the payment to the highest % debt first

All cards operate this way now, and have done since Jan 2011.

dn852k4

PeacefulWaters wrote: »

This is about statements.

When you've paid the £2,300 your cash transaction is yet to appear on a monthly statement. So the funds are used to clear the balance on the most recently issued statement first, ahead of the cash transaction.

This has led to residual interest on the cash transaction between the subsequent statement being issued and payment (now prioritised against the cash transaction on that subsequent statement) being received.

In essence I'm being charged interest because I paid too early? That seems very harsh. Is it worth disputing with Santander?

chattychappy

Yep, pretty sure PeacefulWaters has it.

dn852k4 wrote: »

In essence I'm being charged interest because I paid too early? That seems very harsh.

That is a biased way to look at it. Afterall, you could say it was "harsh" of you just to pay off just enough to cover the cash transactions whilst taking advantage of the 0% on the purchase transactions.

Perhaps repost your transaction list complete with statement dates? We could take a look.

dn852k4 wrote: »

Is it worth disputing with Santander?

Many CCs will refund fees/interest as a "goodwill gesture" because 1) they do indeed value goodwill - especially if a one-off gesture keeps a good customer, and 2) it's cheaper than employing people to deal with complaints - spurious or otherwise.

Personally I think it WOULD be better if payments were always applied to higher interest bearing balances first, regardless of whether they had been statemented. I think that is within the spirit of the regulatory changes a few years back. On the other hand, traditionally you get a monthly statement and that's what you make your payment against. I can see the argument both ways. The T+Cs (and sometimes summary boxes/other literature) make it clear how payments are applied.

So if PeacefulWaters waters is correct, there is no merit in any dispute you raise with them. As I say, we need to see more specifics to be sure.