Do we need to change the way credit cards can charge interest?

adindas

The fact that no one likes to pay interest, fine, I get it. But what you have not mentioned here is that, paying by credit card, you literary get an interest free loan until the next statement month, if you pay off the balance in full stated in the statement. You have the option to pay the balance in full using DD.

In your case the balance to clear is just £364. What about if it was £13,640?

Is getting an interest free loan for about a month not Fair?

Synthespian

eskbanker said:

Interest is charged based on the daily balance, but I think you're forgetting that it'll be charged from transaction date to payment date, if you fail to pay the balance in full by the statement due date.

If you plug all of the daily figures into a spreadsheet, you should be able to reconcile it, but effectively you'd be paying daily interest on a balance building up to £364 between the transaction dates and the statement date, then the full £364 for each day between then and paying the £356, then on £8 each day until finally fully paid off (which will result in trailing interest on the next statement).

When paying off in full, the card companies waive the interest both between transactions and statement, and also between statement and payment (by due date), but if you fail to pay in full, they no longer make those concessions.

Nope.
I absolutely did not forget that.  My point was exactly that ... if I paid off something (not all) from the card, then it should (in a fairer way) remove the earliest transactions from the calculations and charge interest on everything else that wasn't cleared.

Yes, maybe they charged interest on the full up until the £350 payment was made, but that's not what the bank's service staff said.

If the payment is after the statement date, then of course ... interest is charged across it all.

that is exactly what the T&Cs of a number of card providers do when you have transactions that are "now" charging interest, they clear the oldest first to stop the interest on those.  They should extend that to all transactions even in that first period.

Synthespian

born_again said:

You could just call them say you made a honest mistake & as you have never done it before will they ( please) waive the interest.

Of course I did.  Not going to just come on here and whine without trying to be proactive.  It's a wider question, not a pointless grumble.

Synthespian

grumbler said:

Synthespian said:
Do we need to change the way credit cards can charge interest?

What you want is in fact even better bonus/advantage. compared to what you currently have.

No, I'm asking a question.
In a similar vein to how the first questions over loan protection payments were asked.

It's not about a better advantage.  It's about asking if it's right to charge money on things that have been paid off.

It's an easy experiment on the calculations.  Do a massive payment earlier in the month.  Then a few days later, do a smaller payment.

Pay off the massive and part (but not all) of the smaller payment a few days later. 
Now, let's say 4 days have passed since the charge and the payment ... you really think it's acceptable (ignoring what's in the T&Cs) to charge interest on the full balance for the remaining 19 day of the month? 

Synthespian

LunaLater said:

I can’t see any reason for needing a change. If you’ve some bizarre aversion to paying by direct debit then it’s not hard to read your bill and pay the correct amount.

Not everyone gets paid on the same day of the month, every month to have direct debits out at the exact same time.
Yes, I've co-ordinated my payments to fall at specific points.
But I don't get my income as a freelancer at the same times.
heck ... not everyone pays me on time.  It's a risk I take, sure, and I don't overspend, but it's not bizarre.
People's circumstances are different.

Synthespian

adindas said:

The fact that no one likes to pay interest, fine, I get it. But what you have not mentioned here is that, paying by credit card, you literary get an interest free loan until the next statement month, if you pay off the balance in full stated in the statement. You have the option to pay the balance in full using DD.

In your case the balance to clear is just £364. What about if it was £13,640?

Is getting an interest free loan for about a month not Fair?

I don't think I wrote a £13k value in my post. 

Yes, I commented I normally pay off the balance each month. No-one is questioning the fairness of that scenario that helps provide liquidity and the transactions also give money to the card companies from the vendors. 

I know I made a mistake.
I have spoken to the bank.

My question is about the general terms these card providers offer.  And this is a "normal" credit card and not one of those with 105% interest that are scaringly allowed.

I worry about the more vulnerable consumers in our society who don't get this stuff as easily.  That's why we need things like Consumer Duty to make it all clearer.

I don't think it's right to charge on the full balance if you paid of part of the balance inside that initial "interest loan free period".

Again, look at my point about how the "allocation of payments" are made when interest is being applied.  They sensibly understand you have to clear the ones with the most interest first.
If you had a balance transfer, and then transactions, they'll clear the the interest bearing transactions first if you don't get the full balance.

It's a theoretical question outside of what is currently in T&Cs, rather than the many replies lambasting me for my lack of direct debit use which was never the question. I know why, I have a good reason why, I know I made a mistake.

The numbers show it is so imbalanced in how the current T&Cs operate, imho.

It's about consumer duty principles of clear communication to consumers.  Anywhere they write "up to 56 days" should include a statement of "only if the balance is cleared in full" or it can be misleading to those that don't get finances as clearly.


I also made another mistake in not having email alerts enabled, hence my return and multiple posts! :P
Live and learn. :P

CliveOfIndia

Synthespian said:

you really think it's acceptable (ignoring what's in the T&Cs) to charge interest on the full balance for the remaining 19 day of the month? 

It's totally acceptable insofar as those are the T&Cs that you read and agreed to when you signed up for the contract.  If you don't like the T&Cs, don't enter into the contract, simple as that.  No-one is forcing you to have a credit card.  The fact that it's standard practice across all credit cards probably makes it even more equitable.

Synthespian said:

Again, look at my point about how the "allocation of payments" are made when interest is being applied.  They sensibly understand you have to clear the ones with the most interest first.
If you had a balance transfer, and then transactions, they'll clear the the interest bearing transactions first if you don't get the full balance.

Again, standard practice across all cards, and in fact this was made a legal requirement some time ago - all cards must prioritise payments to the portion of the debt with the highest interest rate.

Synthespian said:

Anywhere they write "up to 56 days" should include a statement of "only if the balance is cleared in full"

You will find this clearly stated in the T&Cs.

This is not intended as a personal insult to you, more a general observation - but anyone who enters into any form of contract without fully understanding what they're signing up for has no-one to blame but themselves.  Not reading/understanding the T&Cs is arguably more keenly felt where a financial product is concerned, but it applies to any contract.  A fairly common one is where you're having building work done, and the contract states that the cost either includes or does not include the removal and disposal of waste at the end of the job.  A completely different scenario, but exactly the same principle - and it's not uncommon to hear stories where this has caught people out.

Synthespian

CliveOfIndia said:

Synthespian said:

you really think it's acceptable (ignoring what's in the T&Cs) to charge interest on the full balance for the remaining 19 day of the month? 

It's totally acceptable insofar as those are the T&Cs that you read and agreed to when you signed up for the contract.  If you don't like the T&Cs, don't enter into the contract, simple as that.  No-one is forcing you to have a credit card.  The fact that it's standard practice across all credit cards probably makes it even more equitable.

Now answer the question ignoring the T&Cs and standard practice like I asked, please.

CliveOfIndia said:

Synthespian said:
Again, look at my point about how the "allocation of payments" are made when interest is being applied.  They sensibly understand you have to clear the ones with the most interest first.If you had a balance transfer, and then transactions, they'll clear the the interest bearing transactions first if you don't get the full balance.

Again, standard practice across all cards, and in fact this was made a legal requirement some time ago - all cards must prioritise payments to the portion of the debt with the highest interest rate.

Exactly, it was made a legal requirement because people were profiteering off consumers by charging too much interest than was fair.  This is the same sort of challenge to what is / was in place..

CliveOfIndia said:

This is not intended as a personal insult to you, more a general observation - but anyone who enters into any form of contract without fully understanding what they're signing up for has no-one to blame but themselves.  Not reading/understanding the T&Cs is arguably more keenly felt where a financial product is concerned, but it applies to any contract.  

No, not going to take it as personal insult, because I actually do know the terms, hence why I'm able to then factually and structurally challenge them. Having never made the mistake before (and I'm not just 18 - I'm in my 40s) I never had a moment to question.

But that's what the title of the post is about.  Challenging the current status quo.  Not that I shouldn't have been charged "oh woah is me life is so unfair"

Why I keep saying "as a theoretical question outside of the T&Cs" which, and don't take this as a personal insult ... neither you or many others have actually tried / seemingly bothered to answer in the spirit of the post and the title of the thread.
You all just keep re-stating the T&Cs.
Do you all work for the banks?
The level of treating me like a child who hasn't read, doesn't know, didn't call the bank first is quite staggering for what was meant to be a theoretical structured debate.

FYI ... The PPP payments were in the T&Cs until someone worked out and showed how unfair they were. As were the allocation of payments scenario.

Synthespian

CliveOfIndia said:

Synthespian said:
Anywhere they write "up to 56 days" should include a statement of "only if the balance is cleared in full"

You will find this clearly stated in the T&Cs.

And this one I wanted to address specifically.  Yes, it is in the T&Cs, but what did I say?

For consumer duty a transparency of communication purposes and to help vulnerable customers (some who may have poor cognitive functions which impairs them understanding such long text - which is not me) ... wouldn't it make sense to include that phrase EVERYWHERE they write the "up to 56 days" - cos it's not on the back of the statement clearly and I've checked a few cards.

Elliott.T123

Synthespian said:

But that's what the title of the post is about.  Challenging the current status quo.  Not that I shouldn't have been charged "oh woah is me life is so unfair"

Why I keep saying "as a theoretical question outside of the T&Cs" which, and don't take this as a personal insult ... neither you or many others have actually tried / seemingly bothered to answer in the spirit of the post and the title of the thread.
You all just keep re-stating the T&Cs.
Do you all work for the banks?
The level of treating me like a child who hasn't read, doesn't know, didn't call the bank first is quite staggering for what was meant to be a theoretical structured debate.

FYI ... The PPP payments were in the T&Cs until someone worked out and showed how unfair they were. As were the allocation of payments scenario.

Synthespian, I will try to answer the theoretical question ignoring T&Cs.

My view is no nothing needs to change, while some people may see it as unfair others see it as a fantastic service that is being offered giving them a free line of credit and some strong consumer protection. It will depend on which side of the fence you are on, if you can pay off your card in full every month and know you are never going to forget etc then why would you want things changed. If you are unable to then yes you may well want to change things.

As someone with a direct debit set up I know I will never miss a payment so I really don't want the system to change. If it did then the banks would find another way to make up the lost revenue. It may be that they put up their fees for traders and so either goods all become more expensive to cover the cost or Visa/Mastercard go the way of Amex and are only accepted in certain locations due to the increased fees.

So from my perspective no change required.