Small oversight spells big fees on credit cards

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The Independent Online
CREDIT card-holders who usually pay their bills on time are likely to face huge additional charges if they allow a small amount owing on their account to be carried over to the following month.

The next month's bill may include not just interest on the amount owed from the previous statement but also on any items bought during the new billing period, from the moment at which they were purchased.

Interest charges can mount up in cases where a card-holder forgets to pay a bill off that month because it is so small, or simply disputes an item on the statement.

Nor do all card-issuers automatically refund interest if the dispute is resolved in the customer's favour.

Card-holders may end up paying interest on an amount that has already been refunded by the issuer.

Andrew White, a senior partner with the London chartered accountants Gordon Leighton & Co, found he was asked to pay interest on a disputed pounds 125 item on his Visa statement with Leeds Permanent Building Society in April.

When the May statement arrived, it still included the pounds 125 item, plus interest on it, as well as on everything he had used the card for that month.

After the bill was eventually adjusted, he still had to insist before the interest was also deducted.

Mr White said: 'I was told that the computer that prepares the invoices does not have an automatic system of refunding interest.

'In my case it was easy to notice the amount they were charging, because I always pay off whatever I owe on my card before any charges fall due. That meant as soon as I saw interest on my statement, I knew where it came from.

'What worries me is what might happen to someone who always owes a little on his account.

'That person would not easily be able to work out what interest was due on each item he was being billed for.'

Mr White later discovered that he did after all owe the pounds 125 on his bill and has now paid the amount.

A Leeds spokesman said the society could 'freeze' an amount in dispute, which meant no interest would be incurred on it until the matter was resolved. If the outcome is in the customer's favour, he does not pay interest on the amount.

In the case of Mr White, the society decided instead to check with the shop the money had supposedly been spent in, to see whether there was a credit slip with a signature on it. Meanwhile he continued to be billed for the amount.

The spokesman said that Mr White had been refunded all the interest as soon as he complained.

But he admitted that the building society's billing system did not automatically credit interest back to a customer and that some people might be unaware of what they were being charged.

'It may be that there is a gap in our procedures which we will have to look at again,' he said.

A Halifax spokesman said that customers holding the society's Visa cards were not in any danger of being overcharged: 'We automatically suspend any disputed item from a bill so that no interest is added while investigations on that query take place.

'If a dispute is resolved in the client's favour, there is then no interest to refund because no interest was charged in the first place.'

Alliance & Leicester Building Society, Lloyds and National Westminster banks operate almost identical systems.

However, a Lloyds spokesman said his bank also operated a system whereby if a part or all of a bill on one month's statement was unpaid, no matter how small, all the next month's bill would be subject to interest charges.

He said: 'The system is virtually universal with all card-issuers and is commonly known and understood by card- holders.'

(Photograph omitted)