Do all credit card companies charge to full months interest if you slightly underpay all owed?

stagger321

Hi.
I have been a happy customer of the Nationwide - for Flex current account and credit cards.
I always try to pay off the credit card in full every month.
For the last month I slightly messed up with my payments.
Instead of paying off £1443.09, I paid £1433.09 - slight finger issue.
When I asked why I had been charged £21.87 Merchandise Interest they told me it was because of this mistake.
So I underpaid by £10, and they charged me the whole months interest - which to me is outrageous.
Are all Credit card companies the same??
Thanks

Ebe_Scrooge

It's not outrageous, it's how all credit cards have always worked, forever.

Interest starts to accrue from the date of the transaction until the date it's repaid.  But if you pay the full statement balance, then the interest is waived for that month - sort of a Brucie Bonus, if you want to think of it that way.  Pay anything less than the full amount, then the interest is payable on every transaction, not just the portion that's left after you've made a partial payment.

Assuming your billing cycle is the 1st to the 30th of the month for the sake of simplicity, let's say you spend £100 on the first of the month, and another £200 on the 28th of the month.  Your statement is produced on the 30th, and shows an outstanding balance of £300.  Pay £300, and your interest is waived.  Pay £299 and you'll pay interest - 30 days of interest on the £100, and 2 days of interest on the £200.

OK, I've probably over-simplified it a bit there for the sake of illustration, but that's how it works - and always has done, for every credit card ever.

Asghar

stagger321 said:

So I underpaid by £10, and they charged me the whole months interest - which to me is outrageous.

If you think its outrageous then why did you agree to the terms when you took out the credit card to borrow money from Nationwide.

Which £10 spend did you expect them to charge the interest on, I suppose the last amount borrowed just before the statement date.

robber2

to answer your initial question in full; yes

cymruchris

Yes - it's the way all credit cards work. However in the circumstances, although you're clearly in the wrong, but have made a genuine error which has resulted in the correct interest being applied, there's nothing to stop you writing a very friendly traditional letter on a proper piece of paper, and sending it over to Nationwide to admit your mistake, apologise, and graciously ask them to refund the interest. They will likely say no, but there's a chance the customer service advisor will refund as a gesture of goodwill, and if they do, then it's just that, a gesture of goodwill. 

Coffeekup

Ebe_Scrooge said:

Assuming your billing cycle is the 1st to the 30th of the month for the sake of simplicity, let's say you spend £100 on the first of the month, and another £200 on the 28th of the month.  Your statement is produced on the 30th, and shows an outstanding balance of £300.  Pay £300, and your interest is waived.  Pay £299 and you'll pay interest - 30 days of interest on the £100, and 2 days of interest on the £200.

Somehow I've misunderstood how it works even when I got a better grasp on my finances years ago.
I was under the impression that if you made a transaction on the 1st, then following one's on the 8th, 16th and 24th for say equal amounts of £100 totalling £400 across that month. I understood it as if I pay £350 off the balance the "interest free period" would go from the 24th payment.

Fortunately and miraculously I haven't been charged interest for some time on my card, but now I'll make sure it's paid in a different way. I  have 56 interest free days (I think) on mine before I incur the charges.

So when does the interest free period run from the moment of purchase? Or from billing cycles?

DullGreyGuy

Coffeekup said:
So when does the interest free period run from the moment of purchase? Or from billing cycles?

A blend of the two... its from when the charge hits your account which normally will be the point of purchase but can be later until the due date of the following statement assuming you've been paying it off in full each month. Hence most companies say the likes of "up to 56 days interest free" because it will depend when in the billing cycle the purchase is made. 

See https://www.barclaycard.co.uk/personal/customer/interest-free-period 

etienneg

OP: why do you complicate things so much? There are only two dates that matter: the statement date and the required payment date (which is always shown on the statement). Whatever has been spent by the date the statement is produced must be paid off by the required payment date to avoid interest. Surely that's not difficult to understand?

Dobbibill

@Coffeekup it's 'up to' 56 days interest free - the earlier in the cycle you purchase, the longer you would have - later in the cycle may only give you 30 days rather than the 56 etc.

welcome to the forum @stagger321

To avoid errors like this, a direct debit for the full amount is IMHO the best way forward. A typo is frustrating OP but you didn't make the payment on time and in full therefore are not entitled to the up to 56 days interest free period. As CymruChris says - it won't hurt to ring up and ask nicely about them refunding the interest but remember you are in the wrong not them so it really is only a gesture of goodwill that will get you any refund. 

All the best.

phillw

Coffeekup said:
So when does the interest free period run from the moment of purchase?

You have to clear the previous statements balance. This actually causes a problem for 0% purchase cards if you wait until the 0% ends before paying the statement balance and are still using the card at the time, because if you've been paying minimum balance then you haven't been clearing the statement balance. It can then take a couple of months for the residual interest to stop. So you have to pay the current balance when the 0% ends and ignore the statement.

All credit card companies are the same, however in my experience I've usually managed to get interest waived when I've asked. This normally required setting up a full statement direct debit & they will tell you it's a one time deal.

callum9999

cymruchris said:

Yes - it's the way all credit cards work. However in the circumstances, although you're clearly in the wrong, but have made a genuine error which has resulted in the correct interest being applied, there's nothing to stop you writing a very friendly traditional letter on a proper piece of paper, and sending it over to Nationwide to admit your mistake, apologise, and graciously ask them to refund the interest. They will likely say no, but there's a chance the customer service advisor will refund as a gesture of goodwill, and if they do, then it's just that, a gesture of goodwill. 

There's absolutely no reason whatsoever to write a letter. Send a secure message or give them a call.

In my experience credit cards are generally quite forgiving about a "first mistake" so I wouldn't even say that they're "likely" to say no.