The payment was made on the due date (24/10/2019) and the later statement confirms the payment was credited to the account on the date of payment. The amount of interest seemed a little on the high side to me (approximately 75 times the amount of the underpayment) so I decided to have a go at calculating it myself.
My results (available here at https://1drv.ms/x/s!AlDfB7S22iZ3g5lQxbShDMaNGTRmjg for anyone who is really interested) were less than half those shown on the statement of 29/10/2019. These results were based on the following taken from various bits of the statements
Interest Rates
Purchases and charges - 18.9%pa, 1.456% per month
Cash advances - 23.9%, 1.809% per month
Interest charging information You will not pay interest on purchases if you pay your balance in full and on time each month. Otherwise, the period over which interest is charged will be as follows: for Purchases, balance transfers, cash advances and cash related payments - from date debited to your account until paid in full
Allocation of payments If the amount you pay in a month is less than the full amount you owe, we will apply the amount you pay in the following order:
(a) any unpaid arrears or amounts over the credit limit;
(b) the amount you owe us and shown in your statement;
(c) any transactions, interest or charges not yet included in a statement.
We will apply your payment first to amounts on your account which we charge at the highest interest rate followed by amounts we charged at lower rates. In each case, interest and charges are paid off first. If some amounts are charged at the same interest rate, we will apply your payment to the oldest amounts first.
How Interest is charged
On purchases
We don’t charge interest on purchases if you pay your balance in full by the due date (and you’ve also paid the previous month’s balance in full by that due date). If you do not pay the balance in full, we charge interest on all transactions from the date they were added to the account (not just on the unpaid balance).
...
Daily interest
Interest is charged on a daily basis, so the amount of interest payable will increase the longer payment is delayed, even if payment is made before the due date. Payments will take effect when they are actually received by us as cleared funds.
Like many institutions, M&S don't make it easy to deal with them other than by phone. I didn't really fancy trying to explain my calculations over the phone, so I sent them the following via the messaging facility made available through the online access provided to the account.
I am having some difficulty understanding the charge of £30.38 that was applied to my statement dated 24 October.
Whilst I am highly annoyed that an underpayment of £0.40 has incurred an interest charge of approximately 75 times this amount, I accept that you are entitled to charge interest because the amount showing on the previous statement was not paid off in full.
If I understand your policy on interest charges correctly, the amount of interest charged is based on the 12 purchases showing on my statement dated 29 September and the 2 purchases on the statement dated 24 October, with interest being charged between the date of the purchase and the date of the October statement (ie 24 October 2019).
I have calculated the interest due on these purchases based on the stated annual rate of 18.9% and my calculations are set out below.
Code: Select all
Date Value Days Simple Compound
29/08/2019 £56.90 57 £1.679 £1.559
30/08/2019 £33.00 56 £0.957 £0.888
03/09/2019 £15.30 52 £0.412 £0.382
04/09/2019 £21.90 51 £0.578 £0.536
04/09/2019 £50.50 51 £1.334 £1.236
04/09/2019 £53.00 51 £1.400 £1.298
04/09/2019 £126.96 51 £3.353 £3.108
07/09/2019 £34.63 48 £0.861 £0.797
07/09/2019 £57.83 48 £1.437 £1.332
13/09/2019 £10.28 42 £0.224 £0.207
15/09/2019 £15.65 40 £0.324 £0.300
14/09/2019 £46.49 41 £0.987 £0.913
15/10/2019 £144.86 10 £0.750 £0.689
23/10/2019 £135.95 2 £0.141 £0.129
Totals £803.25 £14.437 £13.374
The Date column is the "Date of Transaction" rather than the later "Date Applied" and the Days column is the number of days between this Date and 24 October 2019 and is inclusive of both dates. The Simple column is the value of the interest calculated on the simple basis of daily interest rate multiplied by number of days, where the daily interest rate is the the annual rate divided by 365. The Compound column uses a compound interest calculation based on a compound daily rate of 0.04744%.
As you can see I calculate the interest chargeable as being £14.44 on the simple basis and £13.37 on the compound basis - each of these is less than half that which has actually been added to my statement. My totals can only be reconciled to the actual value of £30.38 if a further 38 days of interest are added to each transaction (using the simple interest basis) or 44 days (on the compound basis).
I shall be grateful for an explanation. An Excel workbook containing the details of my calculations can be found at
https://1drv.ms/x/s!AlDfB7S22iZ3g5lQxbShDMaNGTRmjg
M&S have, predictably, knocked the interest charge off my account. However, as my message to them shows, I didn't actually ask them to do this, rather I asked them to explain their interest calculation. An explanation which, to date, has not been provided.
Unless I'm missing something, it does seem rather odd that M&S's interest charge is so much higher than the one I have calculated. If anyone has any ideas or an explanation for this then I'd be happy to hear them. I would also add: there was no interest showing on the earlier September statement (because the preceding August statement was paid off in full before its due date); all transactions were either purchases or payments; and, transactions on M&S statements each have two dates a Date of Transaction and a Date Applied which is generally a day later (except for payments when the dates are the same).