CM:

Hi,

This is my first post and apologies if the subject has been raised previously.

I normally settle my credit card sum in full each month to avoid interest. Two months ago, due to holidays, I miscalculated and underpaid, accruing some interest (Month 1). This I understood and increased the next payment (Month 2), to exceed the combined amount for purchases and interest.

When receiving the statement for (Month 3) it started with a small credit due to the above overpayment. However the credit amount was reduced by the application of further interest. The final total was an outstanding debit amount resulting from subsequent purchases, since the last settlement.

When querying this with my card issuer I was advised that when the card is not settled in full, interest is applied on the TOTAL amount spent on the statement from the start of the period, rather than the amount outstanding. This SAME STARTING POINT for interest applies until the interest is paid in full - hence the further interest on the second statement. The customer service adviser indicated that it normally takes around two months to avoid further interest in these circumstances unless further early payments are made.

It appears that part payments of this type do not avoid interest still being applied to the proportion of credit that has in fact been settled. I interpret this approach as applying interest to debts that have been repaid. I was not aware of this from the myriad of conditions and processes and am wondering if anyone else has similar experiences

CM

Seeing the interest charges over two subesquent statements can be explained through "residual interest"

The interest begins to accrue from the day of the purchase until the balance is cleared in full. Providing this is done on or before the due date on the following statement then no interest is actually charged. When you make a part payment then the interest you normally wouldnt see is applied from the purchase date up until the day the statement is printed and is shown on that statement. This interest then continues to accrue until the balance is cleared in full. The final interest charge should be the amount accrued from the previous statement printing date until the day the balance is cleared. This then shows on the following statement. Interest on amounts paid in should stop on the day the payments are received but continue on the remaining balance (but this may vary between lenders, i think!)

I'm led to believe this form of residual interest charge was introduced by Barclaycard and then others followed suit.