mystery interest charge on £0 balance?!

franbozen

Hi, first time post. I recently paid off all my credit cards in full before the payment due date. I then got new statements through from two card providers. Expecting to find the balance at £0, I was surprised to see £2.50 owing. When I looked at the statement it said it was interest charged. Strange, I thought as I paid in full (as previously mentioned) but £2.50 is probably gonna be cheaper than a call to their 0845 no. so I paid it.
I then recieved another statement from another lender. Same thing, I paid in full, expected to see £0 but this time £15 interest?! On what?! Now I'm seriously puzzled! Can anyone help me out here as to what's going on?!

dipsy

just out of interest which card was it?

I had this on my nationwide 0% card this weekend, said it was for a purchase that was then credited back, no purchases made on my card

They then credited the money back only £1.01 but its the principal......

marvin

Its no mystery really

Most cards now charge interest up to the date that money is paid off not to the due date.

If you have a balance owing from last month then interest is charged between the statement date and the payment date.

The only way to avoid interest now is too pay off the balance in full every month never allowing a blance to roll over. If its a balance transfer you have to pay it all off before the end of the interest free period not on the payment date of the next statement.

The latter probably means that 6 months interest free is really just 5 months etc.

Paul_Herring

On what?! Now I'm seriously puzzled! Can anyone help me out here as to what's going on?!

The extra interest is for the balance of your credit card for the days between the date the statement was printed to the date you 'paid off your balance in full,' resulting in the residual interest you saw.

They will only 'not charge interest' next period if you paid the bill off 'in full' the previous period and this period (meaning you shouldn't get charged any interest next month.)

Mandog

I got an Abbey Zero card to use abroad and withdrew cash on it in Italy (in line with Martin's spending overseas advice).

As I understand it I'll be paying interest on that money from the moment it was withdrawn to the moment it's all paid off. How can I make sure I clear it all this month including the interest between the statement and the payment? Should I overpay by a small amount?

Presumably I should also pay it off asap rather than waiting for the statement?

Thanks for any help!

Paul_Herring

Mandog wrote: »

Should I overpay by a small amount?

Presumably I should also pay it off asap rather than waiting for the statement?

Yes. If you want the exact figure it's best to ring them up and ask them how much (ask for a 'settlement figure.')

YorkshireBoy

Paul_Herring wrote: »

Yes. If you want the exact figure it's best to ring them up and ask them how much (ask for a 'settlement figure.')

It won't be accurate though Paul will it, because at the time they give it to you they won't know how long your payment will take to clear onto the account?


Mandog,

You are correct...the best bet is to overpay.

As an example, £1,000 will accrue £1,000 x 23.28% / 365 = 64p per day in cash balance interest.

Therefore, unless your cash balance is huge, overpaying by a fiver or so, once (and if?) they can give you the current figure should do it.

Remember though, that you need to clear the entire bill (including purchases) because the 'order of payments' will apportion your payment to the lowest rate first.

Boff

Can someone explain this one to me It's more about the principle than the amount. I've got a Citcard branded as a bmibaby card last month I had the huge sum of £11.72 outstanding payment date 20/05 on my statement I paid 11.72 on the 16/05 on the 23/5 they have charged me £1 interest. That works out as 8.53% per month where have they got this charge from?

NickX

Well when you get your statement, that shows the balance on the statement date.

If you make a payment in full one week later for instance, this is before the due date, however additional interest will have accrued for that week which then gets carried over to the next statement. This is known as Residual Interest.

I don't know the BMI baby card myself, but I suspect they have rounded the interest up to £1 by saying that this is the minimum interest charge. As you point out this makes the APR somewhat extortionate, so the best solution would be to overpay slightly when settling the balance to prevent the Residual Interest getting carried over to the next statement.

nzseries1

My Barclaycard has the same policy. £1 minimum interest per month if there is any balance at all. rip-off!!!

Paul_Herring

nzseries1 wrote: »

My Barclaycard has the same policy. £1 minimum interest per month if there is any balance at all. rip-off!!!

I think you'll find that's "£1 minimum interest, if there is any interest accrued in the billing period."

Somewhat different from paying off in full where there will naturally be a balance, but where you don't get charged interest (not even the £1.)

Not quite the rip off you seem to making it out to be. You'd have to be (deliberately?) carrying a balance of (19.5% APR -> £1/1.5%=) £66.67 from month to month to be 'losing' out on this.

If your carried over, and average, balance are more than this and you won't be paying any more interest than you would had the £1 limit not been in place.