Can this be right? Credit card interest charge

[Creditschmedit]

i have been charged a fair whack of interest on my credit card. Before I ring up and make a complete idiot out of myself, please can someone help me work out if the charge is correct. I think I’ve been charged too much. Please don’t come at me; I know I’ve been a bit stupid and should have paid it all off in one go.

My statement on 28th Aug was £1534.69 and payment was due by 12th Sept. On 2nd Sept I paid off £750 and then on 13th Sept I paid off another £722. I also got a refund from a shop on 12th Sept of £19.97 and another one of £43.97 on 7th Sept.

I appreciate I was accidentally a day late with the £722 payment so this may have incurred a little bit of interest. My card is apparently 24.49% APR.

My understanding is that store refunds do count as payments towards your overall balance (why wouldn’t they). So by the end of Friday 13th Sept the payments to my card would have been 750+722+19.97+43.97=£1535.94 which is just over a pound more than I owed. As I said though I appreciate I was one day late in the £722 payment so may have been charged a little interest on this.

however I’ve just got my statement and have been charged £56.27 interest? Can this be right? I don’t see how it can be that much. I don’t have a late payment charge as the £750 payment was made before the due date of 12th sept.

Any help much appreciated! Thanks

I think if you're even a day late the interest runs from the purchase date to payment date.

@bragpuss ok thanks, surely it must be from statement date though not purchase date? So would it be 24.49% APR charged from 28th August to 13th Sept? And does that come out at about £56 odd?!

Store refunds don't count as payments. I was once caught out on this. I rang the bank, they explained and refunded the charge as a gesture of goodwill but now I know not to count the returns as payment.

You only get the free interest period if the entire balance is paid by the due date if it’s isn’t everything is charged from the purchase date. It also always seems to take an extra month to right itself with a smaller charge on the next one.

The PP is correct that interest is charged from the date of purchase. Interest is calculated each day, so anything charged to the card on day seven of the cycle (for example), is included in the interest calculation from that day forwards. Also, the interest calculated on day seven (in this example), is then included in the amount on which future interest is calculated.

I've had this in the past where I paid ( as an example ) £900.38 instead of £900.83

I got wacked with a big interest charge. I rang them up and queried it, agreed that it was my error, pointed out my previous good history and they waived it... so maybe you could try that

As above unless you pay the full balance by the due date you'll get hit with interest and a refund doesn't count towards it

expensive mistake

thanks for the explanations. However this has just reminded me why I was actually late with the second payment! I went onto the app to pay on the 11th and it was down for maintenance for a few hours with an apology message. I then forgot to try again until the 13th. So maybe if I call them then they will waive the interest.. I will try. They must have a record of when they have had maintenance periods.

I’m not convinced about the refunds thing though. They are payments to the card and I often factor these in to my overall payments eg if my statement is £1000 and I’ve since had a £50 store refund I will only pay £950 and I’m not normally charged any interest. So am I maybe right in thinking that the charge I’ve got here is from being late with the £722 payment rather than from including the store refunds in my calculations?

Store refunds don’t count towards the minimum payment but of course they count towards clearing the balance otherwise you’d be forced to go into credit.

But if your statement is 1000 then you get a 50 refund it cancels out the original 50 so your new balance is 950.

You can’t count the refund, if you were someone who chooses to pay the minimum payment each month the refund doesn’t count and would put you into missed payment territory.

if you always clear the balance in full ask for a full direct debit to be set up and then you can’t be late again.

Ah ok so the reason I “count” the store refunds is that I clear the balance every month in full. So I’m kind of ignoring what the minimum payment is, I never even look at it, I just pay the full balance minus any refunds I’ve had that month.

So it seems like my £50 odd quid interest charge is only from being a day late with the £722 payment and now I’ve remembered the app being down, I reckon I’ve got a good chance of getting it waived. I’ll try today. Cross your fingers for me!

@Galliano the reason I don’t do a direct debit is that I put all sorts on my credit card including random big one off purchases like holiday deposits and annual car insurance etc so I’m often moving money from sinking funds or making separate payments. However I suppose I could set up the direct debit to come out a few days after the statement date to give me time to move enough money into my current account to cover the direct debit. But then if I’m manually moving money around every month I might as well just pay the credit card manually. I just need to do it before the last minute which I suppose is why I ended up in this mess!

I'd advise to go in very apologetically as it's your fault it's not their problem, they haven't done anything wrong you have so no onus on them to refund you (I'm not having a go just suggesting a way to get them on side).

If you've never missed a payment they will probably waive it. Next time if the system is down take a screenshot of the oos / outage message just in case.

Monzo tells me 2/3 days before the payment comes out how much the payment will be - handy feature

My understanding is that store refunds do count as payments towards your overall balance (why wouldn’t they)

You can't assume this, it might work like this with some cards, but not all because people can use it as a way of keeping spending without having actually paying anything towards the debt, by deliberately buying and returning something and then that counting as the minimum payment, so they don't have to pay any of your own money, so it doesn't on some/all cards. You need to read the small print for your card.

If the deadline to pay was 12 September then the payment on the 13th won't count in this statement period. The interest free period only counts if you pay off the whole balance. Even a penny short and you pay interest from the date of purchase to the date of payment, in their order of payments, again listed in the T&Cs.

Both the credit cards I use and have a full direct debit for take the payment on the payment due date so you would have the maximum possible time to move money

@Creditschmedit

I'll walk you through the factors that could contribute to the charge and how the calculation might work based on the information you provided.
Key Details:

• Statement Balance (28th Aug): £1534.69
• Payments Made:
• £750 on 2nd Sept
• £722 on 13th Sept (1 day late)
• Refunds: £43.97 (7th Sept) and £19.97 (12th Sept)
• APR: 24.49%
• Interest Charged: £56.27
• Due Date: 12th Sept

Factors Contributing to Interest Calculation:

Partial Payments: While you made a significant payment (£750) before the due date (12th Sept), it was a partial payment. Credit card interest is typically calculated daily on the remaining balance (the amount not paid off).

APR Application: The APR of 24.49% is an annual interest rate, which means you’re charged a daily interest rate of approximately 0.0671% (24.49% divided by 365 days). Credit card companies generally calculate interest daily on any unpaid balance.

Late Payment of £722: Even though this payment almost cleared the balance, it was made on 13th Sept, a day after the due date (12th Sept). This means interest accrued on the full balance of £784.69 (the portion left unpaid after your initial £750 payment) for an additional day. Depending on how your credit card company processes payments, they may also charge interest for more days on this portion of the balance.

Refunds: Refunds typically count as payments toward your balance, but interest is calculated based on the time those refunds are processed. In your case, the £43.97 refund on 7th Sept and the £19.97 refund on 12th Sept would have reduced your balance on those specific dates. However, you might still have been charged interest on the outstanding balance up until those refunds were processed.

How Interest May Have Been Calculated:

2nd Sept – 12th Sept: After your £750 payment, you still had a balance of £784.69, on which interest would have been charged daily (at the daily rate of 0.0671%) until 12th Sept.

13th Sept onwards: Since the remaining balance (£722) was paid a day late, the card issuer may have charged additional interest on the unpaid portion of the balance, potentially calculating interest over several days as credit card interest is often compounded daily.

Refunds: While the refunds reduce the balance, the timing of interest calculations may mean they weren’t factored into the balance reduction as immediately as you might expect.

Estimation of Interest Charged:
To give a rough idea, the daily interest on the remaining balance of £784.69 for the period of 2nd Sept to 13th Sept would accumulate as follows:

• Daily interest rate: 0.0671%
• £784.69 × 0.0671% = £0.53 per day

For 11 days (2nd Sept – 12th Sept):

• 0.53 × 11 = £5.83

Then, if interest continued to accrue after 13th Sept on the remaining £722 (since it was paid late) for an additional period before the card issuer calculated the payment:

• £722 × 0.0671% = £0.48 per day

Assuming several more days of interest were charged on this amount (let’s say 30 days until the next billing cycle), this would add around £14.40.

Combined with the previous interest (£5.83 + £14.40), you would get a rough estimate in the £20-25 range. However, given the complexity of compounding daily interest and credit card companies possibly calculating interest on varying daily balances, the total of £56.27 is feasible if more days or different parts of the balance accrued interest.

Conclusion:

The £56.27 interest could be accurate depending on how the card issuer calculated the daily balance and interest. The late payment, coupled with partial balance payments and refund timings, may have led to higher-than-expected interest. You can still contact your credit card provider for a detailed breakdown of how this interest was calculated, which might clarify any confusion.

As the first poster said interest runs from the purchase date until the statement date. The amount charged seems roughly about right for your outstanding balance. It’s irrelevant how much you paid off by the payment date unless you paid the balance in full. The interest is exactly the same regardless of whether you pay the minimum payment or many hundreds unless you clear the balance in full. It is worked out on a daily basis as the pp mentions but they don’t take into account the £784.69 as pp has done. What they do take into account is when each purchase was made and obviously only charge interest from the day of purchase - so if most purchases were made later in the billing cycle the interest is less than if they were made early in the cycle.
If you read the t&c’s on the back of your statement ( on a printed one) or online, it is explained that interest is accrued on the full balance.

Call them, they may waive it if you are super apologetic

My direct debit comes out 3 weeks after the statement, think that's standard. You can pay towards that total up to 3 working days before from other accounts and the direct debit is recalculated (less and it takes the full amount because the direct debit amount is already processed)

Update - I called them, and I was very lucky and they waived it! Partly because I said I logged on to the app on the 11th and it was down, and they had a record of this and apparently their systems were down all day and nobody could really do anything. But also partly they said it was because they could see I paid in full and on time every month. So I got a bit lucky in the end, thanks for all the advice.

I won’t be setting up a direct debit because of the way I pay the bill it would just cause extra hassle, but I will be making sure that in future I pay off the whole balance no later than the 5th to make sure I give myself time for delays, system outages, and just forgetting etc to avoid the same thing happening in the future!

You know if you set up the direct debit you can still make payments as well?

So my statement date is something like the 10th but the DD (set as full amount) doesn't come out til the 26th.

If I've made a particularly large purchase, or sometimes if I just don't want to wait for the end of the month for a larger bill, I just go on the app and pay a chunk.

I don't really see how this makes it more difficult than what you do now but it removes the accidental confusion over balance because of refunds or because as PP said you mistype the pennies. Especially now you've used up your good will for a while.

Because I can either set up a direct debit to pay the full statement balance - which I don’t want to do for the reasons already outlined - or I can set one up to pay the minimum payment which then means that if I want to pay off the full balance I need to manually work out how much is remaining to be paid and then I could still forget to do that. I have a routine where I usually pay the full balance on payday (as my statement comes on the 28th and I get paid last day of the month) but sometimes this is from several accounts depending on what I’ve bought.