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Credit card statement interest calculation - Contract terms and conditions
Mr D was accustomed to paying the full outstanding balance on his credit card statement by the due date. On one occasion, he paid only $600 of the $800 outstanding by the due date and paid the remaining $200 early in the next month.
When he received his next monthly statement, the interest charged to the account was (according to his calculations) more than one month’s interest on the balance of $200 brought forward. He asked the bank for an explanation. It said that in such circumstances it was entitled to charge the account with interest on the unpaid balance which was outstanding for the number of days since each unpaid transaction had occurred. Mr D considered that he should only pay interest on the amount outstanding during the “current” monthly period and only for the number of days until he made the payment. He did not consider that he should have to pay interest for part of the previous monthly period. He said that the bank was “receiving interest it was not entitled to beyond the date when he had paid in full”.
Mr D told the bank that he was not satisfied with its explanation and asked me to review the process.
I asked the bank to provide a copy of the credit card contract which is set out in the terms and conditions of use booklet given to each customer. In the booklet it said: “If payment in full is not made by the pay by date, interest on our current credit card interest rate for purchases, charges and interest will be charged on the daily outstanding balance from the transaction date until the amount is paid in full” (my emphasis). An investigator from my office explained the terms and conditions to Mr D, and confirmed that the interest had been calculated as described in the terms and conditions clause.
Mr D accepted the explanation and agreed that no further action need be taken. However, he also said that he still considered the bank’s interest charging policy to be unfair to its customers.