Credit cards explained

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TurkeyMan

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I've been a client of FNB for some time now, but in June I opened a credit card to maximise my eBucks. The changes I made took me from about R180 in eBucks a month to R800 a month so I've been pretty happy with it.

However, in my latest statement for July I see that I've been charged interest. As I understand it, this shouldn't be possible because of the following reasons:
  • I started spending in June, using my credit card rather than my cheque card for all my standard purchases (except fuel or ATM).
  • During this time I kept my money in my savings account for maximum interest earned and then fully paid off the card on the last day of June. I was not charged interest.
  • This month in July, I again spent normally on my credit card, leaving most of my money in my savings account for maximum interest.
  • Today I wanted to pay off the full amount of my credit card, and I saw that I was charged R237 as "interest".
This doesn't make sense to me, because as I understand it, I have 55 days interest free, and since I fully paid off the card at the end of the month, I shouldn't have been charged any interest anyway. In addition, I don't make any fuel or casino purchases on my credit card since I know that attracts immediate interest. I also don't use the card for ATM withdraws or online payments since it has higher fees etc.

I thought I was being clever, earning more eBucks and more interest, but ended up being charged interest on the card. Luckily what I earned was still more than what I was charged, but can anyone explain this to me?

I appreciate the help.
 
Credit cards come with up to 55 days interest free. The actual number of days can be less depending on when your statement comes in. If you spend a lot just before the statement date, you only get a few days interest free. Then you get charged interest between the statement date and the payment date.

Read this for more. Not a South African article but same concept.

https://www.canstar.com.au/credit-cards/how-do-interest-free-days-work-on-credit-cards/
 
You incur automatic interest on cash. So if you withdrew, bought airtime or electricity etc. It incurs immediate interest. I doubt what 3WA said describes your situation. I would also buy fuel on the credit card @ Engen (as far as I can tell, it doesn't incur automatic interest, but I speak under correction), you get double points, but without more context on what your "normal spending" is (as with the items I listed), I wouldn't be able to tell.
 
Thanks for both of your replies. I wasn't aware that the 55 days interest free applies from the statement date (mine says 29 July), I thought it was 55 days from the date of purchase.

The other thing I realised is that the "payment due date" is the 26th of August, whereas I was paying it off on the last calendar month. So the interest I need to pay might be related to the 4-5 days between the 26th and the last day of the month.

My normal spending relates to groceries, general purchases, basically anything I need throughout the month. But ATMs and airtime I do on my cheque card.
 
I read a few days back an article where a lady made massive waves related to this same topic.

In short, she old the bank to only pay the minimum always on the due date (and then interest was added).

The bank replied with :

You have 2 choices, pay minimum or in FULL each month
 
TurkeyMan said:
The other thing I realised is that the "payment due date" is the 26th of August, whereas I was paying it off on the last calendar month. So the interest I need to pay might be related to the 4-5 days between the 26th and the last day of the month.
Click to expand...

There's your problem. By paying after the due date, you pay interest on all the days from the date of transaction, not just the days after the due date.

Also, it's definitely worth buying fuel on your credit card at Engen. It falls within the interest-free window (unless you use a petrol card), and you get a lot of eBucks.
 
This is where they catch you with "up to 55 days interest free" on transactions. Afaik interest free days (if you do have that on your card) do start at the moment of transaction and the value of transaction. The monthly statement date is nothing more than the banks way of forcing at least some form of monthly payment.

You have to keep in mind when you do each and every "credit" charge transaction, they do not charge interest on transactions within exactly the same month so eventually things can get out of wack and you are due interest one one payment while another is still interest free.

If you swipe on credit on 5th of a month for instance then whatever the amount the individual charge was for will be starting its interest countdown and for those without interest free days they will start to accrue interest from that moment.

Now you do 3 more swipes the day after and the day after that.. Suddenly you have lost track of when interest is due for which transaction and multiple this by 100 or 1000 different tiny swipes throughout a month and you are in the banking system interest clusterfk where you have to individually keep track of when interest is due for which transaction which becomes impossible.

This is how they eventually catch you with interest on random transactions even though you make sure in your mind that you pay before interest is due.
 
I do the same with my Standard Bank CC but I clear it the day I am paid or the day after so I haven't paid any interest in a very long time.
 
Thank you for your replies everyone. I appreciate the help. I'll also call FNB to hear their side of things, just wanted this context before I do.

The last question I have is about FNB's website. They say that "failure to clear the full balance will mean you lose the 55 interest free period for your next and current period".

I have fully paid the card off now. Like I said I only use it because of eBucks. But based on the below, does that mean I will be immediately charged interest on any purchases I make in August because I didn't pay before the due date (25 July)? Regardless of the fact that I've fully paid it off?

Lesson learned. Pay off the card before the 25th, and not the last day of the month...

1564559229379.png
 
TurkeyMan said:
Thank you for your replies everyone. I appreciate the help. I'll also call FNB to hear their side of things, just wanted this context before I do.

The last question I have is about FNB's website. They say that "failure to clear the full balance will mean you lose the 55 interest free period for your next and current period".

I have fully paid the card off now. Like I said I only use it because of eBucks. But based on the below, does that mean I will be immediately charged interest on any purchases I make in August because I didn't pay before the due date (25 July)? Regardless of the fact that I've fully paid it off?

Lesson learned. Pay off the card before the 25th, and not the last day of the month...

View attachment 690651
Click to expand...

I wonder if different banks apply different rules to this interest free day period.

I have had different results depending on the bank so I guess its best to understand what your actual bank , FNB in this case, mean with their interest free period and the exact cutoff to avoid interests.
 
You should instruct the bank to set an auto debit order for your card payments in full for the due date, your statements will reflect this instruction and you shouldn't be charged interest. Also, sometimes when you pay at a POS the cashier might ask you if the transaction is "straight" or "budget", you should tell them it's "straight". I experimented with a "budget" option once and didn't see any difference with my full repayments, but just keep that in mind.
 
TurkeyMan said:
I've been a client of FNB for some time now, but in June I opened a credit card to maximise my eBucks. The changes I made took me from about R180 in eBucks a month to R800 a month so I've been pretty happy with it.

However, in my latest statement for July I see that I've been charged interest. As I understand it, this shouldn't be possible because of the following reasons:
  • I started spending in June, using my credit card rather than my cheque card for all my standard purchases (except fuel or ATM).
  • During this time I kept my money in my savings account for maximum interest earned and then fully paid off the card on the last day of June. I was not charged interest.
  • This month in July, I again spent normally on my credit card, leaving most of my money in my savings account for maximum interest.
  • Today I wanted to pay off the full amount of my credit card, and I saw that I was charged R237 as "interest".
This doesn't make sense to me, because as I understand it, I have 55 days interest free, and since I fully paid off the card at the end of the month, I shouldn't have been charged any interest anyway. In addition, I don't make any fuel or casino purchases on my credit card since I know that attracts immediate interest. I also don't use the card for ATM withdraws or online payments since it has higher fees etc.

I thought I was being clever, earning more eBucks and more interest, but ended up being charged interest on the card. Luckily what I earned was still more than what I was charged, but can anyone explain this to me?

I appreciate the help.
Click to expand...

Your questions have been mostly answered regarding interest calculations.
Just wanted to correct a couple of your assumptions. Firstly, you don't pay interest on fuel transactions. Secondly, you don't pay more to use your credit card for online purchases. In fact, you're losing out on eBucks tier points and actual eBucks earn by not using your credit card.
The only thing for which you should be using your cheque card is Cash at Till withdrawals.
 
TurkeyMan said:
Thank you for your replies everyone. I appreciate the help. I'll also call FNB to hear their side of things, just wanted this context before I do.

The last question I have is about FNB's website. They say that "failure to clear the full balance will mean you lose the 55 interest free period for your next and current period".

I have fully paid the card off now. Like I said I only use it because of eBucks. But based on the below, does that mean I will be immediately charged interest on any purchases I make in August because I didn't pay before the due date (25 July)? Regardless of the fact that I've fully paid it off?

Lesson learned. Pay off the card before the 25th, and not the last day of the month...

View attachment 690651
Click to expand...
As mentioned by mystic twighlight, set an automatic debit order for your credit card to clear the statement amount. Then there are very rare occassions where you pay interest.
I paid 56c interest on my current statement.
I dont have to worry about moving money between accounts, etc.
 
eehellfire said:
Your questions have been mostly answered regarding interest calculations.
Just wanted to correct a couple of your assumptions. Firstly, you don't pay interest on fuel transactions. Secondly, you don't pay more to use your credit card for online purchases. In fact, you're losing out on eBucks tier points and actual eBucks earn by not using your credit card.
The only thing for which you should be using your cheque card is Cash at Till withdrawals.
Click to expand...

Again, thanks for the replies everyone.

Sorry I phrased that wrong. I use the card for online purchases, but I don't use the credit account to do EFTs or ATM withdrawals.

Regarding fuel, I saw on their website that it does incur immediate interest, but I'll give them a call to confirm. Thanks.
 
Fcon_Vpro said:
As mentioned by mystic twighlight, set an automatic debit order for your credit card to clear the statement amount. Then there are very rare occassions where you pay interest.
I paid 56c interest on my current statement.
I dont have to worry about moving money between accounts, etc.
Click to expand...

I just stared at my online banking profile for about 10 minutes looking for this, and cant find it anywhere. Might be because the balance is currently on R0?
 
TurkeyMan said:
I started spending in June, using my credit card rather than my cheque card for all my standard purchases (except fuel or ATM).
Click to expand...

You can put fuel purchases on your credit card interest free now as well if you want to. You just need to always ensure they use a mobile POS device in the forecourt, and not in-store, else it's not recognised as fuel spend.
 
TurkeyMan said:
I just stared at my online banking profile for about 10 minutes looking for this, and cant find it anywhere. Might be because the balance is currently on R0?
Click to expand...
Just had a look on my profile and it seems to be gone for me as well.
It used to be called autopayment. I last set it up about 4 years ago.
https://www.fnb.co.za/demos/pay-credit-card-set-up-auto-payment-PC.html
I think give the credit card division a call and ask them how to set the auto payment.
Just a heads up that the options they give are very confusing. Unfortunately I cant see them now so cant tell you which one I did. But Im sure I selected the option regarding statement amount.
Think you can do full payment, statement amount or minimum payment.
 
TurkeyMan said:
I just stared at my online banking profile for about 10 minutes looking for this, and cant find it anywhere. Might be because the balance is currently on R0?
Click to expand...
Ok just checked the app and I found the option there. When viewing your accounts, click the arrow next to your credit card and select "Maintain Auto Payment".
Looks like they have also reduced down to 2 options for minimum amount and full amount(statement).
 
Fcon_Vpro said:
Ok just checked the app and I found the option there. When viewing your accounts, click the arrow next to your credit card and select "Maintain Auto Payment".
Looks like they have also reduced down to 2 options for minimum amount and full amount(statement).
Click to expand...
Thanks! Just set it up. Hopefully this will avoid this problem in future.

Once again, thanks for the input everyone.
 
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