Help with credit card interest charges on purchases balance when it's cleared

blossomhill1

I hope someone in the know can help me here.  

I'm very careful with my credit cards, using 2/3 to switch balance transfer offers as they become due and paying them down when I can.  During November/December I made some purchases which showed on my December statement, totalling £3,500.  There's also £4,000 in promotional balances.  My statement says that payments will be allocated to the interest bearing purchase balances first and then to promotional balances.  So I was very careful to pay the total of the purchase standard balance before the January statement date.  I paid £3,500.  Now I've received my January statement and it shows a purchase balance outstanding of £1,400 and interest due of £50 ish.  

I've just spent an hour chatting with Virgin where the guy explained everything to me but couldn't tell me why the interest had been accrued, except to say that some charges hadn't cleared when I made payments.  How was I to know that that was the case?  There is nowhere on the statement which points this out and it seems that they have allocated payments incorrectly and I had no way of avoiding this.

I hope that this makes sense and that someone can clarify what I did wrong.  Virgin have now said they'll cancel the interest charge but that I still need to pay £1400 to clear the purchase balance this month, which to my mind I've already cleared, so only the minimum payment should be due.

MorningcoffeeIV

The interest was charged because you didn't clear the whole balance in full just the purchases. 

That means you pay interest on the purchases until they were paid off.

It also seems that some of your purchases hadn't yet statemented so those will need to be paid, as part of your payment cleared the promotional balance.

blossomhill1

I cleared the purchases balance in full.  The statement says that payments are allocated to purchases balances first but in this case they allocated them to promotional balances - as per my original post.  All the purchases were on the statement, and I paid that balance off.

You dont need to clear the entire balance to not be charged interest.  You need to clear the purchases balance which accrues interest.  This is what I did.

DullGreyGuy

It's trailing interest... you're not clearing your total balance in full each month and so interest will be calculated daily on any interest incurring balances. Whilst its not as bad as it used to be before the rules were changed on the allocation of payments its why the advice from sites like this is always never to put purchases onto a card with a 0% promotion 

CliveOfIndia

blossomhill1 said:

You dont need to clear the entire balance to not be charged interest.

You do, except in a very small number of cases (BarclayCard is one of the very few that I'm aware of that will separate purchases from BTs).  For the vast majority of mainstream cards you'll get charged interest on purchases unless you clear the entire balance.

That's why it's always advised on this forum to never spend on a promotional BT/MT card.

Check the T&Cs carefully, but odds on you'll find that this is the reason.

blossomhill1

If I clear interest incurring balances before the statement, they shouldn't be charging any interest at all.  Aren't they obliged to clarify how they allocate payments on their statement and then follow that procedure?

CliveOfIndia

blossomhill1 said:

If I clear interest incurring balances before the statement, they shouldn't be charging any interest at all.  Aren't they obliged to clarify how they allocate payments on their statement and then follow that procedure?

No, they'll charge interest if you don't pay the full balance, the same as just about every other card:

https://gethelp.virginmoney.com/helptopic/subtopic/pagecontent/article/KA-01268/?I-have-a-promotional-rate,-why-am-I-being-charged-interest?

Consumerist

The problem, as I see it, is that when you make a purchase on the card, interest on that amount begins to accrue immediately until you make the repayment which is applied to the purchase balance. It's the delay between the purchase date and the repayment date which attracts the interest charge.

blossomhill1

Thank you for all the comments and help so far.

Here is the relevant paragraph from my latest statement:

We will not charge interest on Card Purchases and related fees, as long as you pay the full balance (excluding any instalment plans and transfers on a promotional rate) shown on your statement by the payment date. Otherwise, we will charge interest each day on all transactions and related fees, on unpaid interest and on any other amounts, from the date they are added to your account until you pay them off in full. The total interest charge will increase the longer you delay making payments.

Note "excluding transfers on a promotional rate".  The only other balances I have are promotional rates so my payments should have been allocated to the purchases first.

GrumpyDil

Just a thought. Did you pay before the statement was issued? 

blossomhill1

I paid the £3511 off after the December statement (that was the amount total on the purchases balance) and before the January statement, which has just appeared.