Negative Interest Rate - I have one!

Ballard

UncleK said:

You wanna try euros - I have some stuck because of a mortgage, so I can't move them - and I'm getting dinged at minus 0.12% - all above board!

My employer has by necessity an eye-wateringly large EUR balance and earns -0.5% interest on it so -0.12% looks pretty good in comparison. 

KeepOnKnitting

At present the bank are sticking to their guns and saying that it is correct, so for anyone else that may have one it is Kent Reliance's D35 Online only easy access account. 

They have said "Upon checking our records we notice that this is a monthly interest account and interest is pre-calculated for the whole month. There was a rate reduction on this account where the interest rate was further reduced from 0.70% to 0.45%, therefore was interest was paid in excess for the month of February, since there was excess interest paid for February the interest has been adjusted from March months interest."

I have responded that I wasn't paid interest in Feb, so I fail to see how they can claw it back. Also my interest rate was 0.1% as my balance was below £1,000, so I didn't get a rate reduction.

eskbanker

KeepOnKnitting said:

At present the bank are sticking to their guns and saying that it is correct, so for anyone else that may have one it is Kent Reliance's D35 Online only easy access account. 

They have said "Upon checking our records we notice that this is a monthly interest account and interest is pre-calculated for the whole month. There was a rate reduction on this account where the interest rate was further reduced from 0.70% to 0.45%, therefore was interest was paid in excess for the month of February, since there was excess interest paid for February the interest has been adjusted from March months interest."

I have responded that I wasn't paid interest in Feb, so I fail to see how they can claw it back. Also my interest rate was 0.1% as my balance was below £1,000, so I didn't get a rate reduction.

That's not actually negative interest as such then - it's simply reclaiming an alleged overpayment, even though you're disputing their right to do so....

rallycurve

Sorry for bringing this old post up but I have had another case of "interest recovered" transaction from Virgin Money and the explanation they are giving does not make much sense to me.

It is an easy access account paying 0.5%, receiving monthly interest on the 10th of each month. These are my transactions for March/April:

Date.	Details	Money out	Money in	Balance
10/05/2022	INTEREST RECOVERED	-0.01		0.99
20/04/2022	Payment to -	-3546.03		1
20/04/2022	Payment from -		3536.06	3547.03
11/04/2022	Payment to -	-1392.72		10.97
10/04/2022	INTEREST EARNED		0.97	1403.69
04/04/2022	Payment to -	-50		1402.72
01/04/2022	Payment to -	-2150		1452.72
23/03/2022	Payment from -		2380	3602.72
21/03/2022	Payment to -	-300		1222.72
17/03/2022	Payment to -	-1105		1522.72
16/03/2022	Payment to -	-100		2627.72
10/03/2022	INTEREST EARNED		1.28	2727.72

I was not expecting any interest in May as the account was almost empty but when I noticed a negative amount, 

I queried that interest recovered transaction and they said:

I have checked your account and confirm that the debit interest amounting to 0.01p on 10 May 2022 is correct, 

We use a standard calculation to work out the amount of interest you earn: 

Cleared balance (or transaction amount) 
x interest rate (or rate change difference) 
x number of days to the next interest payment date 
÷ number of days in the year (i.e. 365 or 366 in a leap year) 

Interest amounting to 0.97 was paid on 10 April 2022 on the assumption that the balance would remain at £1,403.69, however a withdrawal of £1,392.72 was made which has resulted in an overpayment of interest for April. 

To correct this overpayment, we debited this amount on 10 may 2022.

I did check my interest/tax summary for that account and it is £0.97 (it does not include that negative £0.01) which also suggests the debit was wrong.

Does that explanation make sense at all to anyone?

I know it is just 1p but it's not the first time they "recover" interest this way (see previous posts here)

eskbanker

rallycurve said:

We use a standard calculation to work out the amount of interest you earn: 

Cleared balance (or transaction amount) 
x interest rate (or rate change difference) 
x number of days to the next interest payment date 
÷ number of days in the year (i.e. 365 or 366 in a leap year) 

Interest amounting to 0.97 was paid on 10 April 2022 on the assumption that the balance would remain at £1,403.69

That makes no sense to me - I can't believe that they calculate interest on anything other than daily balances, as anything else would leave them open to manipulation by inflating balances on a specific date each month, but obviously any such calculation from daily balances needs to be made in arrears (i.e. once they're known) rather than in advance!  Maybe worth asking them for clarification as to exactly what period is covered by the10 April payment?

Bridlington1

rallycurve said:

Sorry for bringing this old post up but I have had another case of "interest recovered" transaction from Virgin Money and the explanation they are giving does not make much sense to me.

It is an easy access account paying 0.5%, receiving monthly interest on the 10th of each month. These are my transactions for March/April:

Date.	Details	Money out	Money in	Balance
10/05/2022	INTEREST RECOVERED	-0.01		0.99
20/04/2022	Payment to -	-3546.03		1
20/04/2022	Payment from -		3536.06	3547.03
11/04/2022	Payment to -	-1392.72		10.97
10/04/2022	INTEREST EARNED		0.97	1403.69
04/04/2022	Payment to -	-50		1402.72
01/04/2022	Payment to -	-2150		1452.72
23/03/2022	Payment from -		2380	3602.72
21/03/2022	Payment to -	-300		1222.72
17/03/2022	Payment to -	-1105		1522.72
16/03/2022	Payment to -	-100		2627.72
10/03/2022	INTEREST EARNED		1.28	2727.72

I was not expecting any interest in May as the account was almost empty but when I noticed a negative amount, 

I queried that interest recovered transaction and they said:

I have checked your account and confirm that the debit interest amounting to 0.01p on 10 May 2022 is correct, 

We use a standard calculation to work out the amount of interest you earn: 

Cleared balance (or transaction amount) 
x interest rate (or rate change difference) 
x number of days to the next interest payment date 
÷ number of days in the year (i.e. 365 or 366 in a leap year) 

Interest amounting to 0.97 was paid on 10 April 2022 on the assumption that the balance would remain at £1,403.69, however a withdrawal of £1,392.72 was made which has resulted in an overpayment of interest for April. 

To correct this overpayment, we debited this amount on 10 may 2022.

I did check my interest/tax summary for that account and it is £0.97 (it does not include that negative £0.01) which also suggests the debit was wrong.

Does that explanation make sense at all to anyone?

I know it is just 1p but it's not the first time they "recover" interest this way (see previous posts here)

I think I have a rough idea of what they are on about. From what I can gather they round any interest up to the nearest penny if the interest is over a certain fraction of a penny (for argument's sake let's say 1/3 of a penny), then they keep a record of all those + or - fractions of a penny they have/haven't paid and if a whole negative penny is reached they deduct it from the following month's payment. If the April payment was rounded up, and a whole negative penny was reached at that point then their system will deduct a penny from the following month's interest payment, in this case May. I am assuming that as you transferred all but £1 out shortly after the interest was paid in April, there was less than 1/3 of a penny interest earned in that month so in May they paid you no interest from the previous month as 1/3 of a penny was not reached and then they deducted 1p from the month before that's interest payment. Hence the interest recovered.

rallycurve

Well, Virgin Money keep giving me wrong information about this. Now they say that the interest recovered is due to a withdrawal made on the 10 April, which was completed after the interest had been calculated and prepared to be sent to the account. However, the date in my statement for that withdrawal is the 11 April (as you can see above). I am not sure what gives me less confidence on this bank, the fact that they can't calculate interest or the fact that statements display incorrect information...

In any case, can the interest be calculated before the end of the day? Is this normal practice?