Interest calculations!

Can somebody please confirn if I am correct (or not, as the case may be !)

Last month I carried a balance of £226 over on my card. I paid £100 off this month, and added £1500 to the total in new purchases (PE flights to LAX in Feb and a few other bits and bobs).

Last week I had a call off MBNA saying that there had been some suspicious activity on my card, ( a $1 charge to some pharmacy in Texas!) and they would close it, issue a new one and transfer the balance across.

I had the new card today, and this months statement also arrived. On the statement there was a £20.25 interest charge.

I've just rang MBNA enquiring about this, as to my reckoning I should have only been charged interest on the £226, not the NEW purchases as well, but according to them, as I still had a balance it was correct to charge interest on the new transactions from the day that they were made. They called it a rolling balance!!

Is this correct? I always thought that you had upto 30 or so days (depending on statement date etc) after a purchase with no interest added on new transactions, and then if you did not pay off the full balance on your next statement then you would be charged interest on the amount!

Sorry if I've gone on a bit, I've tried to make it as clear as possible. I am really annoyed after speaking to them on the phone, all I baisically had was "I've worked for the company for 12 years, and you are wrong!" I know it's not a huge amount, it's just the principle, and I'd just like to make sure if I am correct before I ring back again.

Thanks

Richard.

My only interest paying experience with them was when I mistakenly paid a bill of over £5000 short by a few pence and MBNA clobbered me for the months interest on the whole balance,my fault but a little harsh.

[mcmbenjamin]

What is the rate? Will be happy to calculate it for you after reading the T and C on the website.

Normally if you are going to carry a balance you are better off to use a card that does not have a rewards program or get a bank loan/line of credit.

Also check the payment dates. They have a habit of changing the payment dates by a couple of days therfore you may get hit for a late payment as I did, as they moved it from the previous month. I really do not like them, but the miles.....

Iain

[HighFlyer]

I recall reading with the original Mastercard that if you transferred a balance to it, and then used it for purchases, you would have to pay interest on the total of each months statement. I guess this is kind of the same situation.

As Iain says, get a separate card if you have a balance to transfer. There are loads floating around, many that give you 0% for 6 months, the Virgin card's level of APR is quite high.

Thanks,
Sarah

Some credit cards use interest cycles. If you pay your credit card off in full you come out of the interest cycle and hence do not pay interest. If you do not pay off the balance then you are in the interest cycle and hence will be charged interest on all balances until the balance is cleared.

This is not something specific to MBNA

Thanks to everybody who has taken the time to reply.

I finally got through to a 'Senior Supervisor' (or something like that!) who agreed that I should not have been charged interest on the new purchases and has refunded the amount.

I know it was not a huge amount, it was just the principle, and the 'I've worked here for 12 years, your just a know nothing customer' attitude of one of the so called call center operators that got my back up!

Anyway, the card is now cleared, and probably closed in the near future.

Richard.

Richard ISTBC but as there was as outstanding balance (regardless of how small),interest has been calculated on the whole ammount outstanding. This process isn't unique to MBNA (and I'm loathe to defend them!)as all card issuers do this.Sounds like you've had a result in having the interest refunded though. Like Sarah says it's the same scenario as if you transfer a balance to a new card and then make further purchases on the new account.

Originally posted by papadoc
I finally got through to a 'Senior Supervisor' (or something like that!) who agreed that I should not have been charged interest on the new purchases and has refunded the amount.

You were lucky. It's policy at almost all US banks (and others, ISTBC) to charge interest on everything charged in a cycle if there is as little as $1 outstanding after a payment is made on a previous balance.

In other words, if you do not pay the entire balance owing on your bill, you will pay interest on the part unpaid AND on any purchases made before the next bill is printed. If you pay that bill off in full, there may or may not be finance charges on the next month's bill, depending on the bank's service agreement.

Read any future tendered offers with an eye to the fine print if you wish to avoid this; if you find a bank not doing it, please post that info here - we'd all love to find one.