Interest charged on AIB CC bill - please help!

I have copied below the details of my two most recent credit card statements. When I received the August bill I was a little confused. I paid off the balance of my July statement (4641.47) more than in full (5258.50) on 10th August (in advance of the 13th August due date). However interest of 23.50 appeared on my August bill. I discussed this with AIB and they told me that the interest that appears on the August bill is related to the fact that I didn't pay off my JUNE bill in full (paid 1500 off 5984.08). I don't think this is right but AIB are adamant. However when I asked them to explain how the 23.50 was calculated they weren't able to (for reference the monthly interest rate printed on the bill is 0.76% - I can't reconcile the 23.50 with this rate and any of the statement balances). I had thought I understood CC statements but maybe I am wrong - can anyone help?

Credit Card statement dated 19th July
Previous balance: 5984.08
Transaction during period: 105.38
Interest: 52.01
Payments Received: 1500 CR (paid by due date of 13th July)
New Balance: 4641.47

Credit Card statement dated 19th August
Previous balance: 4641.47
Transaction during period: 1043.07
Interest: 23.50
Payments Received: 5258.50 CR (paid by due date of 13th August)
New Balance: 449.54

I presume that this is an AIB CLICK VISA Card?
Annual interest rate: 9.11%
Monthly pro-rata rate: 9.11% / 12 = 0.76%
Daily pro-rata rate: 9.11% / 365 = 0.025%

Interest charged: €23.50 on overdue balance of €4,641.47 = 0.51%
0.51% / 0.025% =~ 20

Perhaps you were charged 20 days interest on the overdue balance?

But I'm not sure that that explains it...

Was any of the €1,043.07 transaction in August cash advances?

Yes its an AIB Click VISA and those are the relevant rates. Nope, no cash advances/withdrawals or similar

I found the following excerpt from their T&C's for credit cards. I have bolded some of the parts that possibly explain it. Perhaps my ignorance, but it is news to me in terms of how CC interest is calculated. Would appear to be news to the people I spoke to AIB since they couldn't explain the interest amount charged.

56. Interest will not be charged if you pay the full Outstanding Balance shown on your current Statement by the payment due date shown on the Statement and additionally you have paid the full Outstanding Balance shown on your previous Statement by the payment due date shown on that Statement. The interest rate for purchases and cash advances being applied to an Account will
be notified to you on the Statement. We calculate interest using the interest rate as at the date of your Statement, and interest is calculated using the average daily balance since the date of your previous Statement.
57. If the full Outstanding Balance shown on your Statement is not repaid by the payment due date shown on your Statement, interest is charged on the full balance from the date the Transaction was debited to the Account, as shown on your Statement, until full repayment is credited to the Account. Interest on Balance Transfer transactions will be charged from the date the transaction was debited to the Account until full repayment is made.
58. Subject to Condition 56 above, interest will be payable on all amounts owing to us on the Account. Interest will accrue on a
daily basis at the current rate advised to you (which is a variable rate). Where a demand has been made or judgment sought for amounts you owe to us, interest will continue to accrue. Interest
will be charged to the Account monthly. In respect of Transactions, interest will accrue and be charged from the date it is debited to your Account (this appears on your Statement as the posting date) to the date full payment is received and credited to the Account. Where a part payment is made, interest will continue to accrue and be charged on the remaining balance up to and including the date of the next Statement, when the interest for the period will be debited to the Account. If you pay the full balance on your current Statement but have not paid the full balance on your previous Statement you will be charged interest. Interest will be calculated on the amount unpaid on your previous Statement.

libertine21 said:

I discussed this with AIB and they told me that the interest that appears on the August bill is related to the fact that I didn't pay off my JUNE bill in full (paid 1500 off 5984.08). I don't think this is right but AIB are adamant.

Click to expand...

Credit card interest can be a nightmare to understand, but this sounds correct.
You have an interest free period, but only if you're clearing the balance in total every month.

Edit: I see you've found it in T&Cs yourself.

RedOnion said:

Credit card interest can be a nightmare to understand, but this sounds correct.
You have an interest free period, but only if you're clearing the balance in total every month.

Edit: I see you've found it in T&Cs yourself.

Click to expand...

Yeh I guess my understanding was that it was a lot simpler than it appears to be!

The easiest way to understand credit card interest is as follows.

Step 1) They charge interest in the normal way on the balance on your credit card.
So if you buy something today for €100, they start charging you interest on €100
If you buy something in a week's time for €200, they charge you interest on €300.
If you pay down €250, they charge you interest on the balance of €50

So it's just like your overdraft. No difference at all.

Step 2) Under certain conditions, they waive this interest.
In AIB's case it is
1) if you clear the outstanding balance on your account two months in a row.

You did not do this, so the normal interest rate calculations applied.
But if you now clear it two months in a row, there shouldn't be any interest next time.

Brendan

I got a sense of deja vu writing that reply

Brendan Burgess said:

The easiest way to understand credit card interest is as follows.

Step 1) They charge interest in the normal way on the balance on your credit card.
So if you buy something today for €100, they start charging you interest on €100
If you buy something in a week's time for €200, they charge you interest on €300.
If you pay down €250, they charge you interest on the balance of €50

So it's just like your overdraft. No difference at all.

Step 2) Under certain conditions, they waive this interest.
In AIB's case it is
1) if you clear the outstanding balance on your account two months in a row.

You did not do this, so the normal interest rate calculations applied.
But if you now clear it two months in a row, there shouldn't be any interest next time.

Brendan

Click to expand...

Thanks Brendan. If only AIB could have explained this to me so succinctly...

libertine21 said:

Thanks Brendan. If only AIB could have explained this to me so succinctly...

Click to expand...

But then you would know how to avoid paying interest.

And that is not what they want.

Brendan

How true. I was told once, anecdotally, that the people who pay their balance in full, monthly, were colloquially referred to as deadbeats in one of the larger banks.
They were of no use to the bank, Inna manner of speaking.

Zobeda said:

How true. I was told once, anecdotally, that the people who pay their balance in full, monthly, were colloquially referred to as deadbeats in one of the larger banks.
They were of no use to the bank, Inna manner of speaking.

Click to expand...

Don't the card companies also make money every time you use a card? And wouldn't the issuing bank be getting a cut of that?

I suppose they do. It's an area I know very little about, hence my recounting of an anecdote.

Brendan Burgess said:

But then you would know how to avoid paying interest.

And that is not what they want.

Brendan

Click to expand...

I'd be more inclined to use Hanlon's Razor to explain the poor communication - i.e. ignorance rather than malice on the part of AIB staff.

Hi ClubMan

Not in this case.

When a financial product contains an artificial complication which has no justification from a product point of view, you have to ask why.

When customers get caught out by it frequently, then you need to ask why it's not simplified.

In this case it's artificial. It used to be simpler - clear your balance in full and on time and there will be no interest. But then they changed it to two months, so if you slip up once, you pay interest for at least two months.

Even clearing the balance in full at the end of the month is a bit artificial. People who had a balance of €1,200 who paid €1,000 got charged interest on the full amount.



Brendan

Brendan Burgess said:

Hi ClubMan

Not in this case.

When a financial product contains an artificial complication which has no justification from a product point of view, you have to ask why.

When customers get caught out by it frequently, then you need to ask why it's not simplified.

In this case it's artificial. It used to be simpler - clear your balance in full and on time and there will be no interest. But then they changed it to two months, so if you slip up once, you pay interest for at least two months.

Even clearing the balance in full at the end of the month is a bit artificial. People who had a balance of €1,200 who paid €1,000 got charged interest on the full amount.



Brendan

Click to expand...

Ok - I didn't realise that it worked like that.
Thankfully I've always cleared my CC each month before any interest kicked in.

ClubMan said:

I'd be more inclined to use Hanlon's Razor to explain the poor communication - i.e. ignorance rather than malice on the part of AIB staff.

Click to expand...

Bank literally sit down and see how they can confuse people into paying more. One credit card I had years ago would only allow me to pay a fixed percentage by dd, so that I'd forget to pay it off monthly on time. This was changed to force banks to allow customers to pay a full amount if they wanted to, this way I never inadvertently forget.

My having a perfect credit score can work against me, banks don't want people like me who try not to pay anything. They don't want non payers, but they love nothing better than a person with an overdraft hitting the full limit monthly, only paying off 100 on the credit card etc. They have actuary types working out who are the best customers, which are not the ones who pay everything on time always.

Bronte said:

Bank literally sit down and see how they can confuse people into paying more. One credit card I had years ago would only allow me to pay a fixed percentage by dd, so that I'd forget to pay it off monthly on time. This was changed to force banks to allow customers to pay a full amount if they wanted to, this way I never inadvertently forget.

My having a perfect credit score can work against me, banks don't want people like me who try not to pay anything. They don't want non payers, but they love nothing better than a person with an overdraft hitting the full limit monthly, only paying off 100 on the credit card etc. They have actuary types working out who are the best customers, which are not the ones who pay everything on time always.

Click to expand...

I use my CC very little these days and manually clear any outstanding items but PTSB have had this option for years to automatically pay the CC bill on time each month by DD (subject to there being sufficient funds to cover it in the originating current account obviously):
I would have assumed that other banks would have this too?
It seems like something that anybody that uses their CC regularly should enable to avoid incurring interest charges?

ClubMan said:

I use my CC very little these days and manually clear any outstanding items but PTSB have had this option for years to automatically pay the CC bill on time each month by DD (subject to there being sufficient funds to cover it in the originating current account obviously):

Credit Cards FAQs | PTSB

We’ll answer all your credit card questions simply and clearly, so you stay in the know.

www.permanenttsb.ie

I would have assumed that other banks would have this too?
It seems like something that anybody that uses their CC regularly should enable to avoid incurring interest charges?

Click to expand...

AIB Platinum allow it. Also allow the minimum to be paid automatically, but I believe this is a trap, as once you know the minimum will be paid you're likely to forget to clear the rest.

ClubMan said:

I'd be more inclined to use Hanlon's Razor to explain the poor communication - i.e. ignorance rather than malice on the part of AIB staff.

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Interestingly, the "supervisor" I spoke to tried to tell me that the reason I was being charged interest in "arrears" or on a "back month" as she called it, was because when the statement is issued they don't know whether I've paid the previous month's bill in full. Of course this is nonsense. When I was issued my latest bill on August 19th, my balance from the July 19th statement was paid off on August 10th. The statement on August 19th includes transactions right up to the 18th.

I take some comfort in knowing that even AIB don't understand their own products.

ClubMan said:

I use my CC very little these days and manually clear any outstanding items but PTSB have had this option for years to automatically pay the CC bill on time each month by DD (subject to there being sufficient funds to cover it in the originating current account obviously):

I would have assumed that other banks would have this too?
It seems like something that anybody that uses their CC regularly should enable to avoid incurring interest charges?

Click to expand...

I was referring to the past when my bank of the time would not allow me to pay off the fully amount directly, it takes effort to remember to pay it off each month over a long period of time, and it was done deliberately. So you would get charged interest. Now my Visa/Mastercard is automatic, the only one I manually pay is the Amex.