Academic question. What would happen with 19 pence underpayment?

Belenus

There is no problem here, I am just curious as to what might have happened.

My wife and I are ceasing using our John Lewis Partnership cards as, like many others, we are unhappy with the switch from HSBC to New Day. This has been widely discussed elsewhere.

I recently took out a Santander credit card offering zero interest on purchases and no fee balance transfers for 15 months, a far better deal than JL points with New Day. During the application process I arranged for a balance transfer from New Day for £1,400.19 to fully clear the balance owing to New Day. We do a lot of stoozing and balance transfers and we always pay our credit cards in full to avoid interest.

Santander did the balance transfer but for only £1,400. They did not include the 19 pence. Fortunately I noticed this immediately and paid New Day the 19 pence shortfall.

Perhaps that was my mistake in the application process or maybe Santander balance transfers have to be full pounds only with no pence. I can't see anything in their terms about that.

Regardless, I am simply curious about what New Day would have done if I had not noticed the missing 19 pence. There would be no late or short payment charges as the minimum payment was more than covered in time.

Might they have charged me interest on the full £1,400.19, some other lower interest charge or might they have just written it off?

Thanks

Emmia

They'd charge you the interest on the full £1400.19 balance as you've not cleared it in full.

zagfles

Emmia said:

They'd charge you the interest on the full £1400.19 balance as you've not cleared it in full.

But only for the period that amount was owed (I know that may be obvious but it isn't to some!)

Brie

They may chase you for the 19p (and interest) but it's unlikely to go beyond that. 

My FiL was sent letters for a year after he died because he owed Barclaycard 3p.  They didn't like the fact that he had so inconveniently died owing them money and insisted that he go to a Barclays branch with his death certificate to prove his situation.

If you want to have some fun you could send them a debt management letter saying you'll pay it off 1p a month as long as they send you monthly statements in the post.  

zagfles

Brie said:

They may chase you for the 19p (and interest) but it's unlikely to go beyond that. 

Which could be £20-30. Not just on the 19p

Brie

zagfles said:

Brie said:

They may chase you for the 19p (and interest) but it's unlikely to go beyond that. 

Which could be £20-30. Not just on the 19p

If, as the OP states, they normally pay balances in full to ensure there is not interest then the interest accrued can't be much.  Assuming an interest rate of 35% it would take about 5 years for the 19p to become £1 owed.  

zagfles

Brie said:

zagfles said:

Brie said:

They may chase you for the 19p (and interest) but it's unlikely to go beyond that. 

Which could be £20-30. Not just on the 19p

If, as the OP states, they normally pay balances in full to ensure there is not interest then the interest accrued can't be much.  Assuming an interest rate of 35% it would take about 5 years for the 19p to become £1 owed.  

Err...but if they leave 19p outstanding they haven't paid in full have they. So they'd pay interest on the entire balance while it was owed.  

retiredbanker1

They would also pay interest on any new transactions until the balance was fully cleared.

km1500

it is not a simple as charging interest on the full 1400.19 

you are charged interest from the purchase date of each and every transaction up to the day when you pay off that transaction 

this interest is waved if you pay off the statement balance in full by the date specified 

missing the 19p would have meant that you pay the full interest as calculated above

Belenus

Thanks everyone for your comments.

Can I clarify that I paid the 19 pence well before the due date so I will not be facing any interest charges. I was simply curious as to what might have happened had I missed the 19 pence underpayment. That would have been a costly mistake.

I don't take much notice of credit card interest charges and rules as I always pay them off in full each month, usually by direct debit.

The only time I don't pay in full is when I have a zero interest deal. I set the direct debit for the minimum payment in those situations and pay the full amount just before the expiry of the zero interest deal.

zagfles

Normally with any loan you pay interest on what you owe for the period you owe it. With credit cards there's a specific exemption if you pay the statement balance in full every month. By underpaying 19p you wouldn't get that specific exemption so would pay interest on the full card balance, accrued daily based on the daily balance. 

It's worth understanding the rules if you have a zero interest deal, to get the best out of it. With some cards it's best to  spend the minimum payment when you have a 0% balance transfer so you're not paying down the balance transfer, but this depends on the card rules. With Barclaycard and Nationwide, you trigger the exemption if you pay in full excluding promotional BT rates, so if you spend at least min payment each month and pay the spending off in full you won't pay interest, and you're not having to pay down part of your 0% loan early

With some other cards, you don't trigger the "paid in full "exemption doing this so you'd pay interest on the spending if you did this.