Word to the wise...

henrik1971

Apologies if this has been discussed before on the forum, but I was amazed at what appeared on my latest Halifax CC statement that arrived today.
To explain:

• I have a Halifax CC with a high limit. Only thing on there is a rolling £3k balance which is at 0% for 18 months, with about 7 months left to run.
• Tried to pay for some flights using my debit card recently. I had the money in the bank, but the card got bounced as the transaction was for £1800 and the bank thought it was fraudulent, so paid using the Halifax CC instead.
• The transaction using the CC cleared fine. About a week later I checked with Halifax online banking and could see the transaction had appeared on the account. About two weeks after that, I finally got around to transferring the £1800 across from the current account to clear the flights off before the transaction started accruing too much interest. Then, today, the paper statement arrived in the post and I was alarmed to see that the payment of £1800 had been taken off the 0% balance, and the purchase was sitting on there, now accruing interest at 14.9%.
• Fair enough, winding back the clock a few years, this was how it worked, but with CC providers now allocating payments to highest interest rate balances first, I was gobsmacked. I was expecting to pay a few weeks interest, and perhaps even some residual interest - but not this outcome!

Phoned the bank and explained the situation, and he said it was all about the statement generation date and if you paid off the transaction before the statement date (regardless of the fact that I made the payment weeks after the transaction appeared on the account and they had already started charging daily interest), then the payment would come off the previous statement balance first, which was the 0% balance.
He said it was all in their Ts&Cs and not a banking error.

They go to the trouble of explaining the order in which payments are applied to the account on the back of the statement, but don't anywhere caveat it, or warn that in certain circumstances, this heiracrchy of payments won't apply at all!
After a bit of calm argy bargey, they agreed to reverse the payment and restore my £3k 0% balance rather than £1200 0% and £1800 at 14.9%!!
So, okay result, but could have easily gone the other way..

Ben8282

Sorry but what has happened is normal. You should have waited until after the statement date to pay for the flights.

msallen

Perfectly standard procedure I'm afraid. You were very lucky to get it "corrected".

chattychappy

It does indeed appear to be standard practice.

Once upon a time, the "negative payment hierarchy" was standard practice and that was felt to be unfair. CCs were under pressure to change and this is reflected in the industry's Lenders Code at para 158 see: http://www.lendingstandardsboard.org.uk/docs/lendingcoderevised0915.pdf

158. Subscribers will apply customers’ repayments to the most expensive parts of the credit card balance first. This means that repayments will be applied to the various elements within the balance ranked by order of their annual interest rate (not APR) on a pure high to low basis. In allocating customer repayments, subscribers will apply them to, at least, statemented transactions.

The last sentence is what allows them to apply your payment the way they did and is the exception to the rule. In my view, the exemption to the positive hierarchy should only apply to the extent of the minimum payment. Ie in your case, if the minimum repayment on the previous statement was £100, then £100 should have been applied to the 0% balance, with the £1700 remainder being applied to your (unstatemented) £1800.

So always worth a challenge IMHO despite what the T+Cs say.

Dobbibill

Halifax are right and very generous to correct your error.

http://www.halifax.co.uk/creditcards/help-guidance/terms-and-conditions/balance-transfers-and-purchases/
Section 6.1 is the bit you want.

At least this error hasn't cost you anything and you know what to do in the future.

tlc678910

You probably know this but I didn't
That once I have a balance transfer sitting on my card at 0%, the interest on my purchases applies from the day of the purchase and I don't get the usual interest free period if I pay off the purchase in full at the next statement (probably varies by the card of course)
Tlc

chattychappy

Dobbibill wrote: »

Halifax are right and very generous to correct your error.

I'm sure they had very good business reasons for "correcting [the op's] error"..

grumbler

Dobbibill wrote: »

Halifax are right and very generous to correct your error.

http://www.halifax.co.uk/creditcards/help-guidance/terms-and-conditions/balance-transfers-and-purchases/
Section 6.1 is the bit you want.

In fact, IMO, section 6.1 is not clear. It uses the term "statement" but doesn't say if it's monthly statement or current online statement.

Dobbibill

grumbler wrote: »

In fact, IMO, section 6.1 is not clear. It uses the term "statement" but doesn't say if it's monthly statement or current online statement.

I agree it's not clear. I just hope the link helps the OP understand what part of the T&C's Halifax were referring to.

chattychappy

I also hope that my post helps the OP realise that T+Cs are not everything, especially in the highly regulated world of consumer credit.

I've certainly drafted T+Cs that I know probably wouldn't be enforceable....!

zagfles

chattychappy wrote: »

It does indeed appear to be standard practice.

Once upon a time, the "negative payment hierarchy" was standard practice and that was felt to be unfair. CCs were under pressure to change and this is reflected in the industry's Lenders Code at para 158 see: http://www.lendingstandardsboard.org.uk/docs/lendingcoderevised0915.pdf

158. Subscribers will apply customers’ repayments to the most expensive parts of the credit card balance first. This means that repayments will be applied to the various elements within the balance ranked by order of their annual interest rate (not APR) on a pure high to low basis. In allocating customer repayments, subscribers will apply them to, at least, statemented transactions.

The last sentence is what allows them to apply your payment the way they did and is the exception to the rule. In my view, the exemption to the positive hierarchy should only apply to the extent of the minimum payment. Ie in your case, if the minimum repayment on the previous statement was £100, then £100 should have been applied to the 0% balance, with the £1700 remainder being applied to your (unstatemented) £1800.

So always worth a challenge IMHO despite what the T+Cs say.

If payments aren't applied to the statemented balance first, then how can anyone know if they've cleared the statement balance?

OK, specifically for 0% deals, it usually wouldn't matter, but what if someone had a purchase balance of £2000 on a statement, at say 20% APR, £50 min payment, then made a £100 cash withdrawal at 25% APR. What should payments go towards first?

If the unstatemented cash advance, then the customer could end up thinking he's paid off the previous statement in full, to avoid purchase interest, when he hasn't, because some of the payment has gone towards the cash advance. And so instead of paying 25% on £100, he's paying 20% on £2000!!