Credit cards - am I the exception or the norm?

[Bobby Dazzler]

I found two things out this evening about credit cards which were the complete opposite of my previous understanding. I suspect one of them is just my naivety, the other I'm not sure many people realise.

1. You pay interest on the whole outstanding balance if you don't pay balance in full.

So if you owe £100 and pay £99.99 well in advance of the payment due date, you will pay interest on the full £100 for the whole period up to payment due date.

I pay off my bills in full every month so I hadn't realised, I'd always assumed (incorrectly) that you paid interest on rollover balances only. Me being naive I think.

2. Refund credits from a merchant do not offset against the payment due.

So if you owe £100 and receive a refund in the meantime for £25, and you pay £75, you will pay interest on the full £100 for the whole period up to payment due date.

I really didn't expect that.

Please vote so I can understand just how daft I really am!!

 

[gina2201]

I voted final option. I would have simply assumed you only pay the interest on the balance left, but I've never really taken much notice. Hence 0% interest cards yipee!

 

[Dieselman]

Hence 0% interest cards yipee!

Only on transferred balances...

 

[gina2201]

and purchases I think too!

 

[jaymanek]

i didnt know those mate... but then mine are all set up to take the full amount monthly..

 

[Dieselman]

and purchases I think too!

Better read the T&C's...might be time for a chunk of interest payments..

 

[gina2201]

Better read the T&C's...might be time for a chunk of interest payments..

it does include purchases, phew!

 

[Bobby Dazzler]

i didnt know those mate... but then mine are all set up to take the full amount monthly..

The credit card I've always had set up like that too - only since I got a Shell Citi card which gives you a 3% rebate on purchases have I had to think about it.

You may have guessed I got a shock tonight courtesy of (2). Fortunately, the 3% rebate cancelled out the interest charged, but I'm still horrorfied that they can do that.

I may still write a letter to the ombudsman as I reckon that's naught, and not mentioned in T&Cs as far as I can see.

 

[Bobby Dazzler]

i didnt know those mate... but then mine are all set up to take the full amount monthly..

Just had a thought - good job we got out of the money business when we did!!

 

[DITTRICH]

It will depend on your credit card provider.
Moaning to them can have some effect.
The people the cc companies hate are those who pay off their balance in full. A refund from a shop must count against the amount you owe at some point - question is when? It depends on when the statement is issued. If the refund came after the statement and before the last date yu have to pay then it would be counted as a current transaction and would not be yet due for (re)payment. Things only become due when they are eligible to be (re)paid - this is the statement date. If you know then this date is likely to be you can maximise your credit period to quite alot more than one month.
I knew about the interest bit - again it all revolves around the statement which is effectively an invoice to YOU to cough up. If you don't cough up in full and its in the T&C then yes they can charge interest on the full amount demanded.
My pet gripe - I had a balance o/s on my card for £0.65 and their website would not process a debit card payment for such a lowly amount. I called their call centre and an asian sub continent accented voice suggested I could give them the details of my debti card and cv code from the back over the phone. I told them to take a hike and suggested that having wasted a few minutes of my time when I knew that whatever limits of authority they had must have been >£1. Finally mr clever clogs agrees to write off £0.65. But wait next month I have to call them again as they charged me £0.01 interest on the £0.65. It is no wonder banks have a reputation as being as thick a two short planks.
My 2c
Les

 

[miro]

Im sorry to be annoying but neither of those statements are true.

Firstly, the credit is free up to the date of the billing date. Anything which is owing after the billing date is charged the full rate of interest AFTER the DUE DATE.

So if you buy something the day AFTER your billing date you may be able to get up to 50 days of free credit.

This is because credit cards are bound by a law which says that they may not charge a fee on an amount on money until such time as the cardholder has been notified of the amount owing. Then once the amount has been presented there must be a reasonable amount of time for that amount to be paid.

I owned several credit cars for several years and I think on one of those cars I travelled the world several times and paid $25 interest in the whole period. I paid the full amount owing when the bill arrived and thus no interest is charged on that amount.

I have no idea how a credit from a merchant can be deemed a non-payment. That makes no sense at all. If you are referring to card payments overall, yes you must always make a payment on amounts owing even if you made prior credits. So the moral of that lesson is NEVER pay your card off BEFORE the billing date unless you have paid the FULL amount. The reason, you are contract bound to pay each month no matter what happens unless you owe nothing.

If you draw cash from your credit card, your bank may be sneaky and keep the cash balance earning interest until you clear all debts. In other words they can push the amount owing to be cash advance (which starts on day 1 and it at a higher rate). They passed a law in Australia which dictated that payments made on a credit card must go against the debits in the order in which they were made.

The first statement is true IF you purchased the item as a CASH purchase. This is a trick by merchants who use the SAVINGS or CHEQUE payment method on credit cards to save them the cost of the merchants fees and charge you the full whack of interest from day 1. So perhaps that is the root of the problem.

You can only be charged interest on the amount you have used. If you spend $100 and that day obtain a credit for $25 then there is no reason for any person to charge you interest on $75. Seems that the UK credit merchants have some nice tricks up their sleeves. I assume these problems reside among low interest cards or cards with no annual fees.

 

[Spinal]

This is because credit cards are bound by a law ....

in which country(ies?)

 

[Bobby Dazzler]

Im sorry to be annoying but neither of those statements are true.

I also couldn't believe it could be true, so I persisted with the first call agent I spoke to. I then asked to speak to a supervisor - I was told three times somone would call back within 48 hours (?!), so I said I'd hold. They said the same thing. Re-dialled, and a different agent said the same thing.

Finally I thought this must be Citi Shell specific and part of how they manage to pay 3% rebate on Shell fuel and 1% on other purchases, so I called Barclaycard (leading credit card provider in the UK). They confirmed it too.

Firstly, the credit is free up to the date of the billing date. Anything which is owing after the billing date is charged the full rate of interest AFTER the DUE DATE.

It seems that the full rate of interest is applied to the whole statement balance if it is not cleared in full, back to the date of purchase - not just the due date. I previously thought it worked in the way you described.

I have no idea how a credit from a merchant can be deemed a non-payment. That makes no sense at all. If you are referring to card payments overall, yes you must always make a payment on amounts owing even if you made prior credits. So the moral of that lesson is NEVER pay your card off BEFORE the billing date unless you have paid the FULL amount. The reason, you are contract bound to pay each month no matter what happens unless you owe nothing.

Again I was shocked regarding credits not counting towards the statement balance. I would say the opposite of what I think you said above...

If paying in full pay as close to the payment due date as possible, as you won't pay any interest providing payment is received on or before the due date.

If NOT paying in full, make a payment as early as you can as interest is calculated and charged daily.

 

[miro]

It seems that the full rate of interest is applied to the whole statement balance if it is not cleared in full, back to the date of purchase - not just the due date. I previously thought it worked in the way you described.

Credit is free if you take advantage of the terms of free credit. Why should the bank hold the value of loans at their cost ?

However, I dont imagine they can use discretion on the amount. It has to be the value of the balance. Otherwise you are all being taken to the cleaners and you need some serious banking reform.

If you buy something 1 day after the billing date it is not likely to appear on your current monthly statement. Therefore the bank must hold the value of that transaction till the next billing cycle. If then you dont discharge that cost then you certainly have to pay interest on that amount. Why should that loan be free ?

 

[Rory]

I believe that, to avoid interest charges, you have to clear the balance as printed on the statement, regardless of future credits.

I do wonder though, what would be the position if you were an occasional credit card user and you bought one item for, say £100, and then had it refunded after the statement had been produced?

 

[stevesey]

Only on transferred balances...

The Abbey Zero card gives 0% on everything - got send a pre-approved application just as my existing 0% balance transfer was running out - money gets to sit in a high interest account for another six months

 

[Meldrew2]

I would have assumed you only pay interest on balance left - but then again, I should have realised that the credit card companies are banks - and they never do things in favour of the customer - do they!

 

[Shude]

I knew about (1) because due to being a fool I accidently underpaid my credit card by a few pennies (got the pence the wrong way around, like 57p instead of 75p!) and then got hit for about £25 in interest! Lesson learned there I think!

 

[st4]

Final option. I am wary of using plastic these days due to fraud so pay for everything I can by cash.