Most consumers these days have some idea of the importance of repaying their credit card balance in full, but based on a recent report it seems that many people may not be aware of the full extent of the cost of failing to repay the balance in full. Credit card companies are well known for the high rates of interest that are charged on outstanding balances, and over the past couple of years interest rates have been rising even though the base rate has been falling since December.

Unfortunately people that spread their credit card repayments lose all of the interest free credit on a standard card. Whilst the credit card firms offer up to fifty nine days of interest free credit in most cases this only applies if the bill is paid in full, and does not apply to any part payment that is made. This is something that one Halifax credit card customer found out the hard way, when he paid his credit card bill of over £5000 but forgot to pay a remaining balance of just over sixty pence.

The customer used his Halifax credit card to book some flights, and he wrote a cheque to pay the card balance off. However, he missed a payment of just over sixty pence, and before he knew it he had been hit with an interest payment of over £60, with the lender having charged him interest on the whole balance even though he had paid all but the 62p in full within the interest free period.

He said: ‘It was a genuine mistake. I thought I had cleared my balance and when I received my next bill I thought at first someone else had used it. Then I noticed it was an interest charge - on 62p. When I called Halifax to protest, I was told that it was standard practice to charge interest on the whole amount if you don’t clear your balance and there was nothing they could do about it.’

He continued: ‘I was so furious I rang back again a couple of days later and fortunately spoke to someone else who realised it was a mistake and agreed to waive the charges. But it made me realise just how credit card companies make their money.’

An official from the Halifax said: ‘Those are our terms and conditions so the first member of staff was right, but the second person Mr Baratta spoke to took a more pragmatic approach and I am glad the charge was waived.’

An official from HSBC confirmed that this is standard practice fopr card providers, adding: ‘If a customer doesn’t clear their full balance then their interest-free days do not apply. So they are then charged interest on all balances from the date of their transaction to the day they are repaid.’

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