Interest on full statement balance

tonyb47

I have a Santander credit card which had a 0% interest period ending 29 Feb. My previous statement balance was £1,995, reduced to £1,265 by the time the 29.9% APR interest kicked in. I all but cleared the balance within 7 days (£65 remaining). With interest charged on a daily basis, I expected to be charged around £1,265 * 29.9% * 7/365 = £7-£8. I was charged £47 which is the interest on the statement balance for the full month.

On querying, they say it's part of their terms and conditions because I didn't clear the full balance. I'm sure it is, otherwise they wouldn't say so (!) but I just can't see how this is in any way right or reasonable. They could put in their terms and conditions I owe them my house because my name begins with the letter T but I doubt it would ever stand up! :-)

They offered to raise a complaint but I'm guessing that won't get me very far. Will writing to the financial ombudsman get me anywhere?

Thanks.

Voyager2002

tonyb47 wrote: »

I have a Santander credit card which had a 0% interest period ending 29 Feb. My previous statement balance was £1,995, reduced to £1,265 by the time the 29.9% APR interest kicked in. I all but cleared the balance within 7 days (£65 remaining). With interest charged on a daily basis, I expected to be charged around £1,265 * 29.9% * 7/365 = £7-£8. I was charged £47 which is the interest on the statement balance for the full month.

On querying, they say it's part of their terms and conditions because I didn't clear the full balance. I'm sure it is, otherwise they wouldn't say so (!) but I just can't see how this is in any way right or reasonable. They could put in their terms and conditions I owe them my house because my name begins with the letter T but I doubt it would ever stand up! :-)

They offered to raise a complaint but I'm guessing that won't get me very far. Will writing to the financial ombudsman get me anywhere?

Thanks.

You can only involve the Ombudsman once you have made a complaint and it has been rejected.

bigadaj

Would, be useful if you gave the actual dates.

Credit cards work on a deferred interest basis, is its not that you get a free month to pay your card from regular use, the interest in the purchases is discounted if laid off in full. If you pay off 90% of the statement then you still get charged interest on the full balance even though you've laid off the vast majority, this could be the trap you've fallen into.

grumbler

tonyb47 wrote: »

...On querying, they say it's part of their terms and conditions because I didn't clear the full balance. I'm sure it is, otherwise they wouldn't say so (!) but I just can't see how this is in any way right or reasonable.

Why? It's very reasonable to charge interest on all purchases from the day they were made. Why do you think that the credit must be free?

"Interest-free period on purchases" is an incentive to pay the balance in full and in time. If you do this, the interest is waived.

They offered to raise a complaint but I'm guessing that won't get me very far. Will writing to the financial ombudsman get me anywhere?

There is no anything to complain about.

PeacefulWaters

You've just totally misunderstood how credit cards work.

chattychappy

Maybe some gun-jumping here. I think the OP wasn't clear.

tonyb47 wrote: »

I have a Santander credit card which had a 0% interest period ending 29 Feb.

OP: do you mean you had a promo deal.. eg of the kind "0% on balance transfers for 6 months", or "0% on purchases for 12 months"? Was this what was ending on 29 Feb?

Or was it the standard credit card deal running - no interest if you clear your balance in full, and the "payment due" date was 29 Feb?

If it was the former, then:

tonyb47 wrote: »

My previous statement balance was £1,995, reduced to £1,265 by the time the 29.9% APR interest kicked in. I all but cleared the balance within 7 days (£65 remaining). With interest charged on a daily basis, I expected to be charged around £1,265 * 29.9% * 7/365 = £7-£8.

Your calculations are about right. (Because of compounding, your formula gives an approximation.)

But:

tonyb47 wrote: »

On querying, they say it's part of their terms and conditions because I didn't clear the full balance. I'm sure it is, otherwise they wouldn't say so (!) but I just can't see how this is in any way right or reasonable.

the bolding suggests it was the latter*.

With promo deals, you get a 0% promotional rate that runs out on a particular day. Interest is calculated daily, so it's 0% of the daily balance up until the expiry, and then the standard rate applied to the balance thereafter.

However it is a standard "perk" not to apply interest if you pay your balance IN FULL. If you pay as little as 1p short of the full balance, then the perk doesn't apply - and you pay interest on each transaction from the date of transaction until it is paid off.

Not worth complaining until we have drilled down the detail on this.

(* it is quite possible that this isn't the explanation and the operator simply guessed wrongly as to why interest is more than you expected.)

zagfles

Or another possibility - did you have any outstanding spending on the card that wasn't yet on a statement? They'd probably charge you interest on the spending until the whole lot is paid off.

A month's interest on £1265 at 29.9% APR would be under £28 not £47 so there's something else that's causing the interest.

Thrugelmir

tonyb47 wrote: »

On querying, they say it's part of their terms and conditions because I didn't clear the full balance. I'm sure it is, otherwise they wouldn't say so (!) but I just can't see how this is in any way right or reasonable.

Like a lot of people, you've never bother to read how your credit account operates. You signed up to the terms and conditions. Credit card statements themselves now have to details of interest charges. All in all a costly mistake. Chalk it up to experience. As you are unlikely to make the same mistake again in the future.

chattychappy

PeacefulWaters wrote: »

You've just totally misunderstood how credit cards work.

Thrugelmir wrote: »

Like a lot of people, you've never bother to read how your credit account operates. You signed up to the terms and conditions. Credit card statements themselves now have to details of interest charges. All in all a costly mistake. Chalk it up to experience.

Well the OP hasn't been back, which is a pity.

But I had a problem a few years ago with (I think) PO Mastercard. Exactly the same thing - paid a few days after the expiry of a 0% deal and was charged rather more interest than I expected. Turned out that they had expired the offer early. The promo letter said that I had 12 months from the date of transfer, but they had processed it as being 12 months from the date of the offer. I was overcharged by 3 weeks' standard interest. I gave them the reference on the letter, they looked it up, and agreed it was their mistake.

It might indeed be that the OP didn't understand the "up to 56 days" thing. It is also possible that the call centre tried to fob him/her off by reference to the T+Cs when in fact the CC made a mistake.

zagfles

chattychappy wrote: »

Well the OP hasn't been back, which is a pity.

But I had a problem a few years ago with (I think) PO Mastercard. Exactly the same thing - paid a few days after the expiry of a 0% deal and was charged rather more interest than I expected. Turned out that they had expired the offer early. The promo letter said that I had 12 months from the date of transfer, but they had processed it as being 12 months from the date of the offer. I was overcharged by 3 weeks' standard interest. I gave them the reference on the letter, they looked it up, and agreed it was their mistake.

It might indeed be that the OP didn't understand the "up to 56 days" thing. It is also possible that the call centre tried to fob him/her off by reference to the T+Cs when in fact the CC made a mistake.

Yes - no wonder the OP hasn't been back with so many people jumping to the conclusion that he/she's got it wrong rather than the bank. From what the OP's written either there is more to it as I suggested, eg unstatemented stuff, or the OP's misunderstood something, or the bank have got it wrong - this is possible.

I guess these days it's far too much to ask for bank call centre staff to actually have an understanding of how interest is calculated and explain it to customers.

jonesMUFCforever

The one thing that credit card operators have not beem forced to do is show clearly on every statement the date the promotional date expiry.

eg my Lloyds credit card shows the date it was taken out and the outstanding amount under each balance (I have 2 balances running together)but not when they finish.
It will come I'm sure, with the banks kicking and screaming.