Barclaycard & Santander Credit Cards

rrbartlett

I am writing to warn others of some underhand practises by two Credit Card Companies.

Since their inception Credit Cards have worked on the basis that only the outstanding balance, after a payment made for the month has been deducted, is charged interest on during the following month.

I took out a Barclays credit card, a few years ago, because it seemed the best one to use abroad while on holiday and was able to pay off the statement balance each month.

In May 2022, I was waiting on a payment and to ensure I had enough cash paid off about £1,000 leaving a balance of £80 outstanding expecting to pay a couple of ponds in interest, however, I was charged £23 interest because Barclaycard was now charging interest on the whole statement balance if the whole amount was not all repaid! I am writing to warn others who may not be aware of this change in the Barclaycard rules.

I had also taken out a Santander Credit Card on 14th December 2020 and having seen this on MSE made a zero interest Transfer of money (For 18 months) from it to my Barclaycard on 25th December which I was repaying each month while not using the credit card to buy anything. I therefore cancelled the Barclaycard and used the Santander card instead to buy goods.

After the first month I paid for the total of purchases during the month expecting no interest to be charged, however, I was charged interest and when I looked into the Santander agreement it says that any payments will be taken against the zero-interest portion of the account balance first - Isn't this against the law as I understood that some time ago the Government made it law that all payments went against the highest interest portion of the balance first!

Coming from a banking background I know that a loan period starts from the date of the payment of the money, however, Santander use the date when the account is opened (in the above case 14th December) not the date the payment is made (25th December) as the start date of the zero-interest period. Does this mean that if the transfer was made in March 2021, it would only be for 15 not 18 months?

I fully understand these zero-interest transfers are Loss leaders to entice people to use these banks products but the underhand way in which these banks have changed the accepted system means I will not use their credit cards in the future, and I would suggest that if you are using them or looking at doing so you do not use them as such a boycott is the only way to stop these banks changing things in their favour!

[Deleted User]

Barclaycard - this is standard practice on all cards and always has been as you would know from your background in banking, you get charged interest on the whole statement balance if it's not cleared in full, regardless of how little is left

Santander, no it's not illegal, you should never use a BT card for purchases. Yes they always do it from account opening date, it's an offer for 18 months interest free, that 18 month is not rolling

Nothing Barclays have done is in anyway unusual, you were caught out for not knowing the way cards have always operated
Santander offer period is again the way they have always operated. The payment allocation process is as it is in the terms and conditions you read before you signed up.

Ebe_Scrooge

As above, you have misunderstood how credit cards work.

rrbartlett said:

Since their inception Credit Cards have worked on the basis that only the outstanding balance, after a payment made for the month has been deducted, is charged interest on during the following month.

Totally wrong.  Since their inception, credit cards have worked on the basis that if you pay anything less than the full balance then you will charged interest on the full statement balance, not just the remainder after you have made a partial payment.

And for the Santander "issue", this is perhaps a pertinent lesson in why it's always important to read and understand the Terms and Conditions for any contract you sign up to - boring and tedious though they may be.

grumbler

Ebe_Scrooge said:

As above, you have misunderstood how credit cards work.

rrbartlett said:

Since their inception Credit Cards have worked on the basis that only the outstanding balance, after a payment made for the month has been deducted, is charged interest on during the following month.

Since their inception, credit cards have worked on the basis that if you pay anything less than the full balance then you will charged interest on the full statement balance, not just the remainder after you have made a partial payment.

I think either I misunderstand you or you are mistaken.

If a part payment is made and credited, from this point ("during the following month") the interest is charged on the remaining balance only. Before this instant the interest in charged on the daily basis on all transactions.

daveyjp

Barclaycard approach is standard.  As soon as you spend they are lending you money and interest is accruing.  Pay off in full and the interest is waived, pay in part and interest is due.

dr_adidas01

grumbler said:

Ebe_Scrooge said:

As above, you have misunderstood how credit cards work.

rrbartlett said:

Since their inception Credit Cards have worked on the basis that only the outstanding balance, after a payment made for the month has been deducted, is charged interest on during the following month.

Since their inception, credit cards have worked on the basis that if you pay anything less than the full balance then you will charged interest on the full statement balance, not just the remainder after you have made a partial payment.

I think either I misunderstand you or you are mistaken.

If a part payment is made and credited, from this point ("during the following month") the interest is charged on the remaining balance only. Before this instant the interest in charged on the daily basis on all transactions.

Nope its you who are mistaken credit cards have always worked this way "If you don't pay off your credit card balance in full by the payment date requested on your statement, you'll pay interest on your whole balance"

You may want to check out the link below where they explain it in very simple details.

https://www.moneyhelper.org.uk/en/everyday-money/types-of-credit/simple-guide-to-credit-cards

grumbler

dr_adidas01 said:

grumbler said:

Ebe_Scrooge said:

As above, you have misunderstood how credit cards work.

rrbartlett said:

Since their inception Credit Cards have worked on the basis that only the outstanding balance, after a payment made for the month has been deducted, is charged interest on during the following month.

Since their inception, credit cards have worked on the basis that if you pay anything less than the full balance then you will charged interest on the full statement balance, not just the remainder after you have made a partial payment.

I think either I misunderstand you or you are mistaken.

If a part payment is made and credited, from this point ("during the following month") the interest is charged on the remaining balance only. Before this instant the interest in charged on the daily basis on all transactions.

Nope its you who are mistaken credit cards have always worked this way "If you don't pay off your credit card balance in full by the payment date requested on your statement, you'll pay interest on your whole balance"

You may want to check out the link below where they explain it in very simple details.

https://www.moneyhelper.org.uk/en/everyday-money/types-of-credit/simple-guide-to-credit-cards

Well, where exactly do they "explain it in very simple details"?

"If you don't pay off your credit card balance in full by the payment date requested on your statement, you'll pay interest on your whole balance" is a little ambiguous. I read this like you pay the interest on all transactions in the statement until the due day. The typical misconception is that the interest is waived partly if a part payment is made.

https://www.barclaycard.co.uk/personal/help/spending-transactions/interest-charged

If full payment isn’t received, interest is charged based on an Average Daily Balance on the account. This is calculated by adding up the outstanding balance on your account each day, and dividing by the number of days in the month. The sooner you make a payment to your account, the lower your Average Daily Balance will be and the less interest you’ll pay.

Ebe_Scrooge

It's often a source of confusion.  Let's say you have £1000 outstanding when the statement is produced.  If you repay the full £1000 then you'll pay no interest.  If you pay off £999 then you'll pay interest on the full £1000 (well, ok, interest will be calculated on a daily basis for each transaction, so it's not necessarily a full 30 day's interest on the full £1000 - unless it's a single transaction of £1000 that was made on the first day of the billing cycle).

But many people think that they'll only be charged interest on the £1 that remains.  You WILL be charged interest on this £1 next month, hence why - if you don't clear the balance in full - you need to pay the next 2 statements in full to get back to zero (including trailing interest).

grumbler

Ebe_Scrooge said:

You WILL be charged interest on this £1 next month, hence why - if you don't clear the balance in full - you need to pay the next 2 statements in full to get back to zero (including trailing interest).

It's worth  clarifying, that you don't have to wait for 2 months to get back to zero on your new transactions. Pay the next balance in full - and no interest will be charged on them.

daveyjp said:

As soon as you spend they are lending you money and interest is accruing.  Pay off in full and the interest is waived, pay in part and interest is due.

IMO, this ^ is the best explanation of how interest is charged.

Generally, it's charged on daily basis on the running balance. Pay the balance in full - and it is waived for the new transactions in the statement. No interest until the due date and no interest later as the balance is zero. Pay not in full - and no interest is waived.