Brendan Burgess
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From yesterday's Sunday Times
MBNA customers face months of interest charges for one late payment — even if they miss the deadline by just one a day — under tough new rules introduced last month by the American credit card giant.
The rule change means customers who pay less than they owe, or whose payments are late, will lose the usual interest-free period on subsequent purchases. These new transactions start clocking up interest immediately, adding to the interest already incurred on unpaid balances from the previous month. Previously, MBNA charged interest only on unpaid balances — not on subsequent purchases if paid on time.
“To avoid [paying] any interest on retail purchases, two consecutive statements need to be paid in full and on time,” the company said. “We urge customers to be aware of our terms and conditions.”
Consumer advocates say the new rules are unfair and poorly explained. Tom Conlon, of Bankhawk Banking Advisors, said: “Even an experienced banker would have difficulty understanding these. Cardholders are being hit with an unfair triple whammy: late payment fees, forfeiture of the interest-free period of the current month and forfeiture of the interest-free period of the subsequent month.”
Brendan Burgess, founder of Askaboutmoney.com, a consumer finance website, said: “This should be challenged by the financial regulator because most people don’t realise MBNA will charge two months’ interest for missing a payment by only a few days.”
One reader of The Sunday Times, who always pays his credit card bills on time, was surprised when MBNA charged him a late payment fee of €15.24 and interest of €23.66, spread over two months.
The interest charges began last month when MBNA claimed a September payment had been late by one day. The cardholder paid his bill in full on October 15, even though the payment was not due until November 4, expecting this would put his account in the black. However, the interest charges continued on his next bill.
After being challenged, MBNA agreed to refund the late payment fee, but it refuses to move on the interest charges. It says customers should allow five working days for payments to reach their credit card accounts, even for those made online.
Our reader said his interest bill could have been much higher. “Every transaction from October 8 onwards incurred daily interest,” he said. “If I hadn’t paid off the October balance so early, I would have been charged interest for another 20 days.”
Burgess said MBNA’s new rules would hit hardest those who carry credit card balances from one month to the next, because they might not notice the extra interest. “People who routinely pay interest tend not to be financially literate, so won’t understand consequences of the new terms and conditions,” he said. “Those who can should move to other card providers."
[SIZE=+0]Conlon advised consumers to be wary of picking credit cards on the basis of interest rates alone, warning that the way interest is applied is equally important. “There is no legislation on how interest should be calculated or charged — on any type of financial product,” he said.[/SIZE]
MBNA customers face months of interest charges for one late payment — even if they miss the deadline by just one a day — under tough new rules introduced last month by the American credit card giant.
The rule change means customers who pay less than they owe, or whose payments are late, will lose the usual interest-free period on subsequent purchases. These new transactions start clocking up interest immediately, adding to the interest already incurred on unpaid balances from the previous month. Previously, MBNA charged interest only on unpaid balances — not on subsequent purchases if paid on time.
“To avoid [paying] any interest on retail purchases, two consecutive statements need to be paid in full and on time,” the company said. “We urge customers to be aware of our terms and conditions.”
Consumer advocates say the new rules are unfair and poorly explained. Tom Conlon, of Bankhawk Banking Advisors, said: “Even an experienced banker would have difficulty understanding these. Cardholders are being hit with an unfair triple whammy: late payment fees, forfeiture of the interest-free period of the current month and forfeiture of the interest-free period of the subsequent month.”
Brendan Burgess, founder of Askaboutmoney.com, a consumer finance website, said: “This should be challenged by the financial regulator because most people don’t realise MBNA will charge two months’ interest for missing a payment by only a few days.”
One reader of The Sunday Times, who always pays his credit card bills on time, was surprised when MBNA charged him a late payment fee of €15.24 and interest of €23.66, spread over two months.
The interest charges began last month when MBNA claimed a September payment had been late by one day. The cardholder paid his bill in full on October 15, even though the payment was not due until November 4, expecting this would put his account in the black. However, the interest charges continued on his next bill.
After being challenged, MBNA agreed to refund the late payment fee, but it refuses to move on the interest charges. It says customers should allow five working days for payments to reach their credit card accounts, even for those made online.
Our reader said his interest bill could have been much higher. “Every transaction from October 8 onwards incurred daily interest,” he said. “If I hadn’t paid off the October balance so early, I would have been charged interest for another 20 days.”
Burgess said MBNA’s new rules would hit hardest those who carry credit card balances from one month to the next, because they might not notice the extra interest. “People who routinely pay interest tend not to be financially literate, so won’t understand consequences of the new terms and conditions,” he said. “Those who can should move to other card providers."
[SIZE=+0]Conlon advised consumers to be wary of picking credit cards on the basis of interest rates alone, warning that the way interest is applied is equally important. “There is no legislation on how interest should be calculated or charged — on any type of financial product,” he said.[/SIZE]