📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!

Interest Charges Calculation

I feel like I have been overcharged interest but don't seem to be getting any definitive answers from Barclaycard about it.

My credit limit is £5k, I never exceed that. I have a 0% promotional balance of £590. Therefore I should only be charged interest on an amount of £4410 or below. My monthly interest rate is 2.5688%, therefore the max I should be charged in interest per month, if I carried a balance of £4410 (excluding promotional balance), is £113.28. There were no cash, gambling or any other type of transactions that would incur another interest rate.

This month I was charged £124, so above the max. I can't get an answer I understand from barclaycard except they said I paid interest on my previous statement total and my current statement total, does that mean I am paying interest on the same period twice? My average balance in this billing cycle, excluding promotional balance, was more around the £3,000 mark, which makes the interest charged seem wrong?

Happy to take any ideas. I can't wait to clear this balance, hopefully by the end of the year.
«13

Comments

  • Interest is calculated daily, not monthly, so you will need to work out the interest on that basis.

    Some months have more days than others, so the interest will fluctuate even on a static balance.
  • That's why I gave the average balance of around £3,000. Last month my interest charge was £32 and my statement balance was higher than it is now. I understand timing of payments matters but it shouldn't of increased by 4x as much. It feels wrong?
  • If you don't clear the balance in full, then interest is charged on each transaction on a daily basis until it's paid off.  So it's possible for interest to be charged for more than a month if you're not clearing in full - plus there'll be trailing interest to pay.
    Also, check how promotional rates work.  I've a feeling (I'm not 100% sure) that Barclays is one of the very few that ringfences the promotional rate, meaning you're OK if you just clear the spending.  But for the majority of cards you should never mix spending and promotional offers on the same card - because you'll be charged interest as you're not clearing the full balance.
    But either way, if you're not clearing all of the spending balance every month, that'll likely be the reason.
  • Their explanation is that they charge interest based on purchase balances, not statement balances. So if you pay off £2000 on your card and spend £2,500 in a month, they will charge you interest of £2500 in the month, not £500. Which sounds ridiculous does it not? I'm not aware of any other companies doing it this way? 

    The numbers they are quoting still don't work either. 
  • If you don't clear the balance in full, then interest is charged on each transaction on a daily basis until it's paid off.  So it's possible for interest to be charged for more than a month if you're not clearing in full - plus there'll be trailing interest to pay.
     
    My balance has gone down (average and total balance) from last month, yet I'm being charged 4x as much as last month. 


    Also, check how promotional rates work.  I've a feeling (I'm not 100% sure) that Barclays is one of the very few that ringfences the promotional rate, meaning you're OK if you just clear the spending.  But for the majority of cards you should never mix spending and promotional offers on the same card - because you'll be charged interest as you're not clearing the full balance.

    Yeah barclaycard is fine for that.

    The numbers they are quoting still don't make sense at all.
  • eskbanker
    eskbanker Posts: 36,928 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Their explanation is that they charge interest based on purchase balances, not statement balances. So if you pay off £2000 on your card and spend £2,500 in a month, they will charge you interest of £2500 in the month, not £500. Which sounds ridiculous does it not? I'm not aware of any other companies doing it this way? 

    The numbers they are quoting still don't work either. 
    Perhaps worth sharing the actual numbers and dates in more detail?

    Ultimately, card companies calculate interest on the balance owing each day, so it's impractical to look at the situation averaged over an entire month (or more) and validation needs to include daily calculations.
  • I've just asked and my estimated interest next month is down to £58.29 again. It seems like Barclaycard have some weird mechanism of hitting you big in interest the following month after purchases. 

    I think the customer service rep doesn't know what they are talking about as they say my interest will not change if I make further payments today even though my interest if fluctuating so much month on month. Reducing my balances will lower my interest. It's not helpful when the people you speak to don't seem to understand their own mechanism. 

    I'm fine that it is back to a reasonable figure month on month now and will just reduce that down.
  • eskbanker said:


    Ultimately, card companies calculate interest on the balance owing each day, so it's impractical to look at the situation averaged over an entire month (or more) and validation needs to include daily calculations.
    Essentially within the space of three days I lowered my balance by about £2k and then spent £2k again on it. Instead of a net impact of zero, they seem to have lowered my interest last month by the £2k payment and then whacked a big interest charge on this month for the £2k spent. Feels a very weird practice as they quote that interest is calculated on purchases within a month, not statement balances and movements.
  • They've now just said if I paid £2,000 today, my interest will not change at all as I have not cleared my balance. This is just blatantly wrong. 
  • Their explanation is that they charge interest based on purchase balances, not statement balances. So if you pay off £2000 on your card and spend £2,500 in a month, they will charge you interest of £2500 in the month, not £500. Which sounds ridiculous does it not? I'm not aware of any other companies doing it this way? 


    How it works is you make a purchase on the card.  This starts accruing interest on a daily basis.  When you get your statement, it shows all the purchases you've made, and in the background there is an amount of interest that needs to be paid - interest that each transaction has been accruing each day since it hit your account.
    If you pay off the balance in full (or, in the case of Barclaycard, all of your purchases), then the accrued interest is waived.  If you pay anything less than the full amount, then all the accrued interest becomes payable - not just the interest on the portion that's left after you've made a partial payment.
    This is quite standard, and is how every card works (in fact, BC is slightly better than most in that it separates out purchases from promotional offers).

Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 350.6K Banking & Borrowing
  • 253K Reduce Debt & Boost Income
  • 453.3K Spending & Discounts
  • 243.6K Work, Benefits & Business
  • 598.3K Mortgages, Homes & Bills
  • 176.7K Life & Family
  • 256.7K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16.1K Discuss & Feedback
  • 37.6K Read-Only Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.