KBC Credit Cards - KBC Incorrectly Applying Payments

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MugsGame

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This should probably be a separate thread, but you've reminded me of something annoying.

tomdublin said:
the way the account is presented on the KBC app is confusing (to me at any rate). It's hard to tell what
Click to expand...

Oh it's not just the app that's confusing about which amount is which, the KBC statements are misleading and I've been meaning to put in a complaint about it. Even if you repay the full amount on the statement each month, their system can still charge you some interest, despite the statement saying that repaying the full amount will avoid interest.

Why? Repayments are credited against fees first and only then against the transaction balance. But non-Euro transactions incur a percentage fee which is shown as a separate line item on the statement, distinct from the transaction amount.

If you've made any foreign transactions since the statement was issued, part of your repayment is credited against the fees for those newer transactions, rather than the transactions from the statement period. Therefore your repayment for the full amount doesn't pay off the full amount and you are charged interest on the difference.

A workaround is to repay slightly more than the statement amount, to cover any interim non-Euro transaction fees

Their help desk are aware of this "issue". KBC are the first credit card issuer I've come across who breakout non-Euro fees as a separate line item and therefore handle repayments in this misleading way, charging (admittedly small) amounts of interest on spending and repayment patterns that wouldn't incur interest with other banks.
 
Update - 3rd October (to save people reading the whole thread.)


I have spoken to KBC about it

1) A customer brought this to their attention in 2017
2) They realised that for a very small cohort of customers, the system was incorrectly allocating the payment against current charges before allocating it against the old balance.
3) They fixed it.
4) It affected fewer than 100 customers who were charged on average €8 interest.
5) They phoned the customers to explain it
6) They refunded the money

Brendan



Hi Mugs

That is very interesting.

On my AIB account, say I have a balance of €1,000 and I pay €980...

As I have not cleared my account in full, I lose the interest-free period and pay interest on the full €1,000 and not just on the €20.

What happens with KBC?

Assuming there are no non-Euro fees, if you have a balance of €1,000 and pay €980, do you get charged on the €1,000 or the €20?

Now let's assume you have a balance of €1,000 and later incur €10 in non-euro fees. You pay the €1,000, what happens?

Brendan
 
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What happens on my AIB account in the following scenario.

31 August get statement for €1,000 with a payment date of 20 Sept. (Pay in full to avoid interest)

10 Sept withdraw €3=100 cash. Get charged 1.5% or €1.50

Pay €1,000 on 20th Sept.

Actually, I think that they do clear the €1,000 balance first and not the cash withdrawals first. Because these days, they charge a cash withdrawal fee and no further interest if you clear it by the due date.

OK, that is not the same thing as your issue.

Brendan
 
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OK, I had a look at their Fees and Charges. This is what they say

upload_2018-9-26_8-3-30.png


Are you referring to charges for cash withdrawals rather than non-euro purchases.

Their Terms and conditions are similar to AIB's.

They don't seem to have any clause stating "Your payment will be first set against 1) non-euro transaction fees 2) the balance from the last statement 3) cash withdrawals."




13.4 Interest begins to accrue on the Account in respect of any cash withdrawals from the day the cash is withdrawn. There is
no interest free period in respect of cash withdrawals.

13.5 Fees and charges (including without limitation a cash advance fee) may apply in respect of cash withdrawals. Please see
our Fees and Charges Booklet for further details.

15.4 Non-euro transactions may attract additional fees and charges as outlined in our Fees and Charges Booklet. In addition
some ATM providers in other countries may charge a fee for use of their ATM facilities.


17.2 If you discharge the entire balance payable (including balances outstanding from previous statements) on your Account by
the due date specified in your monthly statement we will not apply interest to your Account in respect of the outstanding
balances detailed in that monthly statement. If the entire balance is not discharged by the payment date specified in your
monthly statements we will apply interest to your Account in respect of the outstanding balances from the transaction
date up to the date of repayment at the then applicable interest rate. All purchases, cash advances, fees, charges,
Government Stamp Duty and any other amounts debited to the Account are eligible for interest calculation purposes.

17.3 Interest will accrue from day to day on the basis of a 365 day year or on such other basis as we may determine from time
to time. Interest is calculated on the average daily balance outstanding.
 
Hmm, maybe they have corrected things, I only got caught for interest once. I'll have to double check their T&C's and my recent statement and get back to you. I may take one for the team and only repay the quoted balance this month, just to see what happens!

Brendan, I am referring to fees for non-Euro purchases (e.g. Amazon UK orders), not cash withdrawals. Although there might be a similar issue with cash withdrawal fees.

Brendan Burgess said:
On my AIB account, say I have a balance of €1,000 and I pay €980...

As I have not cleared my account in full, I lose the interest-free period and pay interest on the full €1,000 and not just on the €20.

What happens with KBC?
Assuming there are no non-Euro fees, if you have a balance of €1,000 and pay €980, do you get charged on the €1,000 or the €20?
Click to expand...

Charged interest on the €20, as I'd expect.

Now let's assume you have a balance of €1,000 and later incur €10 in non-euro fees. You pay the €1,000, what happens?
Click to expand...

This is the problem scenario. You payoff the €10 fee then €990 of the balance, leaving you with €10 of the balance unpaid, which interest is charged on. Not what I'd expect. Arguably this even calls their quoted APR into question.
 
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The fees appear on the statement as Non-Euro Transaction Fee. I assume this is the 2% Currency Conversion Fee quoted in the fee booklet. Most banks hide this within the transaction amount, rather than breaking it out.

It's interesting on non-Euro refunds, as banks get a double dip on the FX, and only KBC's treatment makes it transparent. I.e. you're charged a 2% fee on the original purchase amount, the merchant refunds the amount before fees (and you hope the FX spread hasn't moved too much) and then you pay another 2% fee on the refunded amount!
 
MugsGame said:
This is the problem scenario. You payoff the €10 fee then €990 of the balance, leaving you with €10 of the balance unpaid, which interest is charged on. Not what I'd expect. Arguably this even calls their quoted APR into question.
Click to expand...


Hi Mugs

Let me explain how KBC and AIB calculate interest.

1) You buy an item on 1 August for €1,000
2) You buy another item on 15 August for €600
3) You get a statement on 31 August for €1,600
4) Your 31 Sept statement will show the following interest for August
€1,000 @12% for one month = €10
€600@@12% for half a month = €3
Total interest €13

This is the same as say a current account overdraft. There is nothing complex about it.

But...If you pay it off in full and on time, they waive the interest.

So I am surprised that you are paying only €990 out of €1,000 and being charged interest on the €10.

Did you check the actual calculations?


Brendan
 
MugsGame said:
The fees appear on the statement as Non-Euro Transaction Fee. I assume this is the 2% Currency Conversion Fee quoted in the fee booklet.
Click to expand...

It's very odd that they don't describe it as "2% Currency Conversion Fee". I wonder could it be something else?

In any event, what they are doing is wrong.

Brendan
 
Hi Brendan, thanks, I know this sounds unbelievable. I understand how banks normally charge interest.

In your 990 example above, I would have paid the full 1000 statement balance, but only 990 was credited against purchases.

I pay off my balance in full each month so am normally never charged interest.

As it happens I switched from AIB to KBC (no balance transferred), paid off the full amount on my first KBC statement but was then charged interest. When I rang to complain, KBC customer support explained it was due to fees being paid off first!

I'lI dig out the example over the weekend so we can check the figures
 
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MugsGame said:
Hi Brendan, thanks, I know this sounds unbelievable. I understand how banks normally charge interest.
Click to expand...

Hi Mugs

I felt as I was writing this that it sounded condescending. No offence intended.

But it took me ages to figure out how credit card interest was actually charged. It is frequently reported incorrectly in the media.

I had explained it here

How credit card interest is calculated. How to get an interest-free period.

It seems to me that as you are not clearing the balance in full, according to KBC, you should be charged interest on the full amount and not just on the €20. So it occurred to me, and I was surprised, that you might have the same misunderstanding as everyone else.

I suspect that you were actually charged the interest on the €1,000.

Brendan
 
Brendan, reading your posts again, I so rarely pay interest on credit cards that I'd missed your point about losing the interest free period on the full amount when making a partial repayment. Turns out I don't understand this as well as I'd thought. :D

I'm probably wrong that I was only charged interest on the fees rather than the whole amount, so I do need to check the calculations. But this makes what KBC did to me even worse...

PS: our last posts overlapped, I didn't find your previous posts condescending. It always surprises me, and this treatment is why I always pay off the full balance each month but I had completely forgotten the details. Thanks for trying to explain it to me again!
 
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MugsGame said:
I'm probably wrong that I was only charged interest on the fees rather than the whole amount
Click to expand...

I suspect you are being charged interest on the whole amount which would make it a very big error affecting a lot of people.

If you were charged interest just on the Currency Conversion fees, it would be wrong, but could only be a few cents wrong.

€1,000 purchase @2% = €20 conversion fee
€20 @20% a year = € 4 interest per year
€4 /12 = 33 cents.

Brendan
 
So I dug out my first three statements from my KBC credit card:
Code: 
Statement  Due     Old Bal   Paid     Credits   Spent    Interest  Fees   New Bal
12-Jun     7 Jul   0         0        6.31      726.85   0         4.42   724.96
12 Jul     6 Aug   724.96    724.96   5.91      862.07   0         0.18   856.34
12 Aug     6 Sep   856.34    856.34   11.5      1884.77  6.14      16.4   1895.81

All dates are 2017.
All credits are % rewards for qualifying purchases.
All fees are "Non-Euro Transaction Fee", aka the 2% currency conversion charge in the fees booklet ([broken link removed])

KBC's statements then and now include the text "No interest will be charged on purchases if you always pay the full amount shown on your statement by the due date.". I pay off the full balance before the due date, so I won't be charged interest, right?

Well I was charged interest on my August statement for not paying my July balance in full. 'Hang on' I hear you say, 'all your summary table shows is you paid the correct amount, but are you sure you paid your July statement balance before the due date of 6th Aug'?. Well trust me I did. I always do. Which is why I was never charged interest by my previous credit card provider.

So what's going on? As folks have pointed out above, the fee booklet and the Terms & Conditions ([broken link removed]) don't explain this. You need to look at KBC's Standard European Consumer Credit Information ([broken link removed]) in particular:
Payments received will be applied to the account in the following order:
• fees, the oldest first
• Interest in relation to cash advances, purchases and then balance transfers
• cash advances from previous statements
• purchases from previous statements
• balance transfer amounts from previous statements
• cash advances on the current statement
• purchases on the current statement
• balance transfers on the current statement
Click to expand...

So my payment of my full July balance before 6th August was initially credited towards foreign purchase fees, before the remainder was applied to my July balance. As I was then deemed by KBC's computer not to have paid off my full July balance in time, I lost my interest free period, and as Brendan expected, I was charged interest on the whole July statement amount (you'd need the line item details to verify this, but it checks out).

Now the eagle-eyed among you will have spotted a remaining anomaly. I wasn't charged interest on my July statement. But I did incur fees on my June and July statements. This puzzled me when I spotted it today, until I went through the transaction detail. The explanation is the June fees were included in the June statement balance, so they were paid off in time, and in July I had no foreign purchases before I made my payment for June, so there were no July fees to pay at that point (I incurred them later in July).

It's a necessary condition to get caught by this that you make some foreign purchases between your statement date and your payment date; this is what happened me between 12th July and 6th August, leading to interest shown on my August statement .

Is there an overcharging scandal here? I'm not sure. It's certainly not what you'd expect. The guidance on the statements seems misleading. And KBC's Credit Card Terms & Conditions don't refer to the SECCI document. KBC's helpline referred me to the SECCI document when I rang them to complain last year, but I'd forgotten about it until I consulted my notes today.

To avoid the trap myself I adopted the practice of rounding up my payments to cover foreign commission fees.

As an experiment, for my September 2018 statement, I've paid the exact amount instead of rounding up. I have incurred foreign exchange fees since 12th September. So I should shortly incur interest provided KBC haven't changed their treatment.

Well, maybe - a large transaction was refunded to me a few days ago, and I haven't incurred any fx fees since then. I'd expect this refund to be credited against the fees first, so I may not be charged interest after all.

I'll know in about a week and will update you. I may have to repeat the experiment for my October statement to be sure. But surely I'm not the only one who was impacted by this so far?
 
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By contrast, AIB's SECCI (https://aib.ie/content/dam/aib/pers...udent-mastercard/student-SECCI-for-portal.pdf) says
Payments received will be deducted from the opening balances on the Account in the following order based on the portion of the balance representing:
• interest;
• fees from previous Statement;
• cash advances (including cash from a Cash Machine) from previous Statements;
• purchases from previous Statements.

The remainder (if any) will be applied to Transactions on the current Statement in the following order:
• fees;
• cash advances;
• purchases and Balance Transfers; and,
• any other promotional offers
Click to expand...

Note the distinction between "previous" and "current" statements. In my experience, KBC are the anomaly and AIB's is the usual practice for the Irish market.
 
I haven't gone through your transaction details properly, but just 1 comment.

MugsGame said:
Note the distinction between "previous" and "current" statements.
Click to expand...
That shouldn't matter, because the following statement exists in KBC fees document:
"Fees are calculated on a monthly basis and charged in respect of the previous month. Details of any fees charged will be confirmed in your statement."

So fees aren't due until they appear on a statement.
 
Interesting find. But KBC's transaction fees appear on the statement beside the corresponding transaction. So in practice transaction fees are charged immediately, and paid off first.

I'd expect this note only applies to the non-transaction fees, which are listed first in the fee table. Although granted, that's not what they actually say in the booklet.
 
Mugs

Thanks for the detail.

upload_2018-10-1_9-7-22.png


So, in summary, you got a bill on the 12 July which had a balance of €724.96
This statement had the text:
"No interest will be charged on purchases if you always pay the full amount shown on your statement by the due date."
You did so.
You should not have been charged any fees.

It is against all the principles of the Consumer Protection Code to "penalise"you for not paying something before you know what it is.


Brendan
 
Update

I have spoken to KBC about it

1) A customer brought this to their attention in 2017
2) They realised that for a very small cohort of customers, the system was incorrectly allocating the payment against current charges before allocating it against the old balance.
3) They fixed it.
4) It affected fewer than 100 customers who were charged on average €8 interest.
5) They phoned the customers to explain it
6) They refunded the money

Brendan
 
Thanks for following up Brendan. On checking my later statements, KBC did ultimately refund me in the middle of a statement, but they didn't make it obvious in the statement summary. They may well have phoned me - I ignore unexpected calls from unknown or private numbers.
 
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