When we complained we were told that the interest was charged on the original balance owing and not he remaining outstanding balance, and they said this was set out in the terms and conditions. Are we being ripped off? S.B
Terms and conditions: Average daily balance information is set out in credit card T&Cs, but some people still get caught out. Adam Uren, of This is Money, said: The first thing that should be noted is that Asda has agreed to waive the £16.69 charge on your account after it was contacted by This is Money, so you won't have to pay any interest at all for that bill.The problem you have run into here is that you assumed that the interest would be charged on the remaining balance on the payment due date, but this isn't how interest is calculated on card debts.Interest is calculated on a daily basis, meaning it begins to accumulate on the day you make a transaction.If you pay off your balance in full when the bill is due, then you will not incur any interest charges.However if the whole balance is not paid off, then typically the interest owed is calculated using the 'average daily balance' method. More... Applying for a credit card? You'll pay 9% more than the advertised rate for a patchy credit score My credit rating is excellent (and I've got a £1m house), so why am I not getting the best loan and credit card rates? Need a credit card? Find the best deal for you This works by adding together the amount outstanding on your balance each day, then dividing it by the number of days in the month. The interest rate is then applied to this figure.So while you had a remaining balance of £100 after you paid most of the balance on your billing deadline date, you only had that balance for one day of that month, with the debt much higher for the rest of it. This practice is set out in its terms and conditions.In response to This is Money, head of Asda Money Kirsty Ward said: 'Firstly, we are very sorry for any confusion that this issue has caused to our customer.
'As is standard practice within the industry, our customers can choose to make either a minimum, full or payment of an amount in between when they receive their monthly statement.
'Interest is then charged from the date of a transaction and continues to be added until the outstanding balance on the card is paid in full.
'In this instance, the entire balance was not paid by the required date and therefore interest was added to the account from the date each transaction was made.
'On this occasion, as a goodwill gesture we have made the decision to waive the interest. We also do everything we can to ensure our terms and conditions are communicated clearly to our customers and it’s really important customers understand the need to pay the full balance outstanding to avoid any interest being applied.'