MBNA Hidden Late Penalty Charges

Servitas

I have an MBNA Credit Card and two months ago I was late arriving back from holiday and cut the payment time too tight. My fault, I incurred a late fee penalty of £12.00 and an interest charge of £42.02. A bit steep but it was my fault, so I paid the full balance off, including the late fee and interest. Imagine my surprise when on this statement they had made an interest charge of £13.66. I phoned them and they said that once I had incurred a late penalty, then I lost my 'Interest free period' of 53 days, so that I had to pay interest for the time between my late payment being received and the end of the statement period.
I queried the point with them, as I had paid in full, including the penalty & interest but they said that it was in the small print that these were the Terms & Conditions. This was not disclosed to me, by any documentation, when I received the statement incurring the penalty. I received the normal advice on making a payment and nothing else. Is this legal?

skyrider007

The normal rule is that you have to pay full balance in the last TWO statements in order to benefit from interest-free. Anybody feel free to correct me.

Servitas

As I paid off the balance in full at the first time of asking, including the penalty and interest, I was nt aware that there would be anything further to pay.

I accept that it takes two months to get your interest free period back to 50-odd but what have they charged interest on if I have paid it all off?

NickX

Servitas wrote: »

I accept that it takes two months to get your interest free period back to 50-odd but what have they charged interest on if I have paid it all off?

They have charged you interest on your balance FROM the Statement Date TO the Date that you made the payment. This is known as RESIDUAL INTEREST and is the reason why you need to clear the full balance twice to completely stop the interest accruing.

The only alternative would have been to slightly overpay the balance to allow for this residual interest.

bengal-stripe

Servitas wrote: »

I accept that it takes two months to get your interest free period back to 50-odd but what have they charged interest on if I have paid it all off?

Let’s say, your bill was compiled on the 8th of the month. The amount charged in interest, would have been the interest incurred up that date from the date of the previous bill one month earlier. You pay the entire bill on the 18th, the monies did reach your account on the 21st
.
You would still owe the interest for the days between the 9th and the 21st. Therefore the interest charge would reflect those thirteen days where you still owed the bank money.

Servitas

Thanks everyone. I still think it is morally wrong that you have to guess what to pay, if you don't know that you have an outstanding balance.

I have spoken with the Financial Ombudsman and they are happy to take this complaint on for me.

Hopefully we'll get some clarity in the future.

Best regards

YorkshireBoy

Servitas wrote: »

I have spoken with the Financial Ombudsman and they are happy to take this complaint on for me.

I'm very surprised, for two reasons...

1. The T&C's and credit agreement are very clear on what will happen in such circumstances, and

2. You haven't exhausted the MBNA complaints procedure first (and received a letter of deadlock).

exel1966

Servitas wrote: »

Thanks everyone. I still think it is morally wrong that you have to guess what to pay, if you don't know that you have an outstanding balance.

I have spoken with the Financial Ombudsman and they are happy to take this complaint on for me.

Hopefully we'll get some clarity in the future.

Best regards

TBH with you, you don't really have any grounds to complain as your card company have done nothing untoward here. It's merely a mis-understanding on your behalf on the workings of credit card interest. Admitedley, it is not always easy to understand these things as the terminology used can be tricky when new to cards, but at no time have you had "to guess".

There are very strict set procedures laid down by the FO before accepting any complaint regarding a financial institution. Firstly that you must have exhausted all reasonable avenues with the card company concerned and secondly follwed the set time scales permitted (8 weeks).

DestroyingAngel_2

Interest and payments are always adrift by a month. Interest accrues on a daily basis, from the time the statement is printed to the time your payment is received. If you were late with payment, you would have been charged interest on the whole outstanding balance for the previous month. To generalise somewhat, if you paid a bill in June, it would be the May interest you're paying off. Hence, you'd always need to pay your balance off in full and on time 2 consecutive months for the interest to disappear. The 1st month you see interest, that's for the outstanding balance; the 2nd month's interest is "residual interest", which is any interest that has accrued from the time you made the full payment to the time the next statament is printed.

Just remember, if you always pay off your balance in full each and every month, then you'll never see interest. Once you miss a payment, or failed to make the minimum payment on time, then expect to see interest on 2 months' statements even if you pay it off in full, and the interest will go away from the 3rd statement.