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Contractual interest?

Glenn UK

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I would go further and argue that in fact there is no logical choice but to claim the unauthorised rate (for banks) or the cash advance rate (for cc companies).


Arguably the link between the cash advance rate and unlawful borrowing by the defendant is quite weak but I'm not sure there is anything better in CC Terms and conditions.


If anyone has a better logic for CC companies id be interested to hear it.






OK., Glenn - you asked for it !! Brace yourself !!:!:


This may not be better logic, but it's mine, anyway, FWIW. As I understand it from the info published by a couple of banks (shown below), and from other BAG posts:-


Neither the APR nor the EAR rates are the annual rates actually used to directly calculate compound interest with. Unless the interest is simple, or is compounded annually (or longer), then the EAR or APR is higher than the actual annual rate used.


For a given amount (the Principal), of £100, interest at an annual rate of 20.00% compounded daily will amount to £22.13 after one year. The EAR rate is the interest added after one year, expressed as a percentage of the Principal amount. So the EAR in this example would be 22.13%. If, however, the interest rate being applied was 20.00% simple (or 20.00% compounded annually), then the total interest added would be £20.00 and the EAR would then be 20.00%.


Normal Credit Card purchases - The same would apply to a credit card purchase of £100. Interest at an annual rate of 20.00% compounded daily will amount to £22.13 after one year. The APR rate will then be 22.13%.

Cash Advances:- The difference between EAR and APR occurs when there are certain additional "one-off" charges made in relation to the amount in question, and the initial cash advance fee is one such charge. For a Cash Advance of £100, incurring a one-off fee of £2.00, the annual interest rate of 20.00% compounded daily REMAINS THE SAME. However, the Principal amount (for the purpose of calculating compound interest) becomes £102.00, so the interest at an annual rate of 20.00% compounded daily will amount to £22.58 after one year. The total cost of borrowing that £100 over the first year will have been the £2.00 fee, plus the interest of £22.58 = Total of £24.58. so the APR rate in this case will be 24.58%.

Thus in my understanding, there is NO higher or lower (as in "unauthorised or authorised") rate of annual interest actually being applied to credit card borrowing - just one single annual rate. The apparent difference in rates is only existent in the APR rates, and is purely the result of the mechanics involved in adding the fee to the Principal amount, and not applying a higher rate.

If you apply the standard formula for calculating compound interest to the EAR or APR rates, you will technically get the WRONG ANSWER. If you do the same, using the APR for cash advances, then you will be EVEN MORE WRONG. For £100 claimed 6 years ago, then, the Court could theoretically then say "Bill-k - you HAD £332.08.....you've just LOST £232.08 !!

Having said that, the difference between calculating the interest using the actual annual rate applied, and the AER is fairly small. And I have previously conceded to Vamp that this is perhaps one technicality too many, and can be reasonably expected to be beyond the understanding of the average account holder. Anyway, the banks designed it that way, didn't they ?

Is anybody still with me on this - or have you now joined the Woolwich ? !!

Whilst we can claim contractual reciprocity with regard to the interest rate, I am not so sure that we can do so with the "one-off" cash advance fee - and if we could, then how could we apply it? How often, and when ? Maybe we can safely add their standard cash advance fee to each and every charge, but maybe that is being just a bit TOO "reciprocal" ...!!...? Another can of worms ??

I stress this is just MY understanding of interest rates, and the difference between CC's & current accounts interest rates & methods. If you have understood it, too, then welcome to my funny-farm !!



Qouting published Bank info I found online:-



Gross means the contractual rate of interest payable before the deduction of income tax at the rate specified by law.


AER is the notional rate which illustrates the contractual interest rate as if paid and compounded on an annual basis.


APR is the total charge for credit in line with regulations under the Consumer Credit Act 1974 and is used across the whole UK financial industry on the basis it allows you to compare the cost of different forms of credit (such as loans and credit cards). When an APR is calculated, certain fees and charges are taken into account.


EAR is the equivalent annual rate taking into account the interest rate and how often interest is paid but excludes any fees or charges.


Intelligent Finance:-

Current Account

Item EAR* AER**/Gross Gross Monthly Interest Net Monthly Interest

Credit Balance 2.75% 2.72% 2.17%

Authorised overdraft 9.80%

Unauthorised overdraft # 25.00%


# If, without our agreement your current account goes overdrawn or you go over your overdraft limit, we will charge you interest on the amount you are overdrawn or the amount that is in excess of your agreed limit at our unauthorised overdraft rate.

* EAR is the Equivalent Annual Rate. If we agree to let you have an overdraft, we will decide your overdraft limit and tell you what it is. Overdrafts are repayable on demand.

** AER stands for Annual Equivalent Rate and illustrates what the interest would be if interest was paid and compounded each year. The gross rate of interest payable before the deduction of income tax at the rate specified by law is the contractual rate specified by law. The net rate is the rate of interest payable after allowing for the deduction of income tax at the specified rate (currently 20%).

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Without reading this too much, a quick question... Are you lot claiming cash advance fees?


Sorry about "War & Peace" Vamp - No, I was explaining my understanding of APR rates. If you claim the higher credit card APR rate (for cash advances) as contractual, then you might be in danger of accidentally doing just that, and it might get your contractual rate thrown out. :confused:

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Glenn - I'll split my post into sections in future to make scale-clicking easier and get some free clicks as well (Compound clicking !) TBH., I have never clicked anybody's, as I have only just realised what they're for !! I ought to go back and and rattle yours a few times. I recall one of the ladies saying she could click yours all day, lucky lad !! ;)


As we seem to agree, it might be that we're being more precise than we need to be, as claimants in person, but there is a possibility in my mind that a bank could say that applying the cash advance APR is not strictly contractual. This being that the rate ACTUALLY USED to actually calculate the interest on both normal purchases AND ca's is one and the same. The EAR and APR rates are there for marketing purposes only, to enable us thick gits to compare between credit or service providers. These rates are BASED on the actual rates the banks use, but are NOT themselves used in calculating our interest.


If you use the EAR or APR rates, then these will give a slightly higher rate than you are contractually entitled to. If you use the ca APR rate, then it will be even higher, because it contains the additional element of the one-off ca fee. To apply this fee as part of your compound interest rate is incorrect, and they might be able to say that you are not correctly arguing for the contractual rate, and get you bumped down to s.69.


If you use the lower (normal purchases) rate of APR, then - although it is technically incorrect - they will hopefully leave it be, as your earlier payout seems to imply.


...But we shouldn't leave it to hope, should we ?


Dammit, I've motor-mouthed again - I can't see the top !!:lol:

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....I've just been back to my User Control Panel, and realised how the scale-clicks work. Thanks for yours, Glenn. Until now, I thought it was Mods awarding reputation points !!


What do I do with my points - can I redeem them for a wee free giftie or something ?? I've probably got just about enough for a little calculator/clock/radio/bottle opener or summat !!!

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Be careful about the cash advance rate - for my MBNA card it is exactly the same as the normal rate.

It would seem from that, that MBNA don't charge a "one-off" fee for cash advances, then - is that right ?


If so, I don't know how long that has been for (closed mine last year), but it is perhaps another sign that they are realising how vulnerable these charges and penalties are, and slowly wrapping everything up in their interest rates - and out of reach. :mad:


Now here's a thought - If they are going to be raising their rates over the next few months to compensate for losing their penalty charges. Is it not worth considering delaying our Contractual Interest claims until later, so we can quote their new higher rates ?


...Or is that being just a bit naughty. :rolleyes:


...Then again, who can accuse us of that anyway - the accused ?? :grin:

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Cheers for the click, kind Sir !!


Glad my rambling meant some sense. Yes, what you say you understood from it just about sums it up. I only wish I could put things as clearly as that !!!:grin:


As far as I can make out, there is no spready to cope with all the varying rates over the years, and it would appear to me that as Joe public personal claimants, we are not expected to have to do that. It seems perfectly acceptable to claim Contractual at the currently publicised rate(s) - after all, the original contract was for variable rates, wasn't it ?


Perhaps the bank could argue in court that a lower, averaged, rate should be used, but if the principle of mutuality & reciprocity is to be upheld, then it must allow the current rate to be used IMHO.


See my last post. (can I say BUMLP ?) ;)


What say you, Glenn...?

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BTW - thanks again you guys - I've just noticed I've got 2 green squares, now ? Getting the hang of it, now - and that bit closer to a facelift.


Good 'ere, innit ?


I'll be backtracking later on to repay some favours !!


Cheers again,




PS - can I add to my sig something like "If I tickled your fancy, you can click my scales!" ?

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Roydosan & Sir,


I see your point about the various rates over the years, but I'm still not sure that we should be expected to apply them. Having received 3 bundles of DPA SAR info back so far (admittedly just for current accounts), basically all I got was a set of copy statements. These only showed dates, descriptions and amounts of each transaction. The banks did NOT provide any information regarding interest rates in force over the periods covered.


Thus, in reciprocity, if they do not provide the info when asked for it, then we should not be expected to have it when we claim. It seems fair enough to me to just use the most recent (and current) published rates, as that is the only information that they can reasonably expect us to have on their rates.


Having said that, if they HAVE provided the earlier rates to you in response to a request, or you have admitted to them that you have this info, then I guess you may then be expected to use it. But we're all encouraged to shred our statements, etc., these days, aren't we ? !! :grin:


So, I'm still not fully convinced of the requirement for earlier rates.

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Could I just clarify a small point with one of you regarding the interest rate to enter on my spreadsheet for claiming Compound Contractual interest ... The rate which appears on my statement is 1.8735%/Month so do I just multiply this by 12 & use 22.482%?? :confused:


I can't find the published APR for a couple of my cards & I really wanna get this right.


Thanks in advance

Chezt, no that is incorrect. I haven't had to work this one out, myself, so I'm not sure exactly how the banks do it. As far as I understand, you have to divide the monthly rate by 28 to get a daily rate, then multiply that by 365 to get the annual rate. This gives 24.42% pa.


I have so far always applied the current published annual rates, though, and have found these on each banks website online. You might have to click "More Details" or similar, but they're there somewhere.



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Interestingly, First Direct sent copies of all my statements and they clearly show interest rates in force at the time... HOWEVER, MBNA just sent a statement of charges. I would therefore think that the principle of reciprocity and mutuality counts here because as Glenn pointed out, I know the varying interest rates for First Direct, but I don't for MBNA. That's not my fault as a laymen, I asked for the details and that's what I got sent... I'm going to use the variable rates for First Direct, and the contractual interest rate in force at the moment for MBNA.

Sir, I see you're in undeniable possession of knowledge of the varying rates for First Direct, and are intending to apply them. I have not done this, myself, yet, but if I find myself in that position, then maybe I shall have to.


A question for yourself and Roydosan, if I may. The spreads I have seen so far calculate daily compound interest separately on each entered charge, then multiply this by the number of days since that charge was made. Then they finally add up all of the individual calculations at the bottom. OK., it is fairly easy to punch in the interest rate applicable at the time for each individual charge, and get it to calculate from that. But if you just do that, then you are no more correct than if you had used one single rate.


Every time the interest rate changes, then it is applied to ALL cumulative charges, and NOT just the charges made after the date of the change. Does your spread do this ? If so, can you briefly tell me how you do it, and I will do the same with mine.


I will then be ready for the time when I find myself in undeniable possession of Sir's knowledge !!


Thanks in anticipation.



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Chezt, I see what you mean. It doesn't add up does it ? Like I said, I haven't had to convert from monthly to annual rates, so I can't really say why that is - sorry.


If you've been sent notice of the current annual rate for your card by YB, then I'd use that. If you COULD find your particular card rates listed online, then presumably that is the rate you would find being published there as well, anyway.


I guess YB are not promoting a Visa card anymore, hence no sign of it on their website.


If they've sent you written notice of your current annual rate, then I'd say that is the rate to use. Likewise with Studio cards, if their published annual rate is 39.8%, then I'd use that.





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i'm just stuck now on JJB/Duet card through Creation Finance as they charge 2.2% monthly which I presume is around the 30% mark ... think I'll have to give them a ring and just ask eh!


Sorry I wasn't too much help, there, Chezt !!


Yeah, I think a lot of people ring them for latest rates. I prefer online if possible, as you have some downloadable copy you can make, and also you can compare and decide for yourself which rate to use of the various rates listed.


FWIW you could try here:-


Creation Financial Services Limited




Welcome to DUET


If no luck, then get 'em on the blower, mate !! :-)

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Nobody's much use to you Chezt !!! :(


Hope the blower yields a result.


That online conversion formula - can you tell me where ? I can manage to grasp the formulae for compounded daily, and APR to actual annual rate, but I really fancy a bit of hardcore now and again - and that one sounded really good !!! 8-)

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Chezt - just expressing sympathy for you - hitting brick walls everywhere.


Thanks for the hardcore links - I'll lock myself away for a bit 8-)


Dunno about a spreadsheet, but I'll try and come up with something !! :lol:


Cheers, matey.

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Blimey - never again !!! Those links are scary :eek:


I thought I was being a bit of a geek 'til I went there. No more hardcore for me !!


Thanks, Sir, for your formula. As you say, if it's close enough, then it's close enough.


I've got some HBOS statements which show monthly AND annual rates together, and indeed, your formula concurs with these, as it does with your test above.


Well done, and thanks. :-)

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Just a point - why would you not refer to it as APR? I've called it this in my letters ... Quote from one of my leters 'I also claim compound contractual interest at a rate of 18.94% APR as set out in the attached schedule of charges'


Do you think I'm wrong doing this?


Chezt, notwithstanding anything on those wretched hardcore sites, nor anything Sir has to say, my meagre understanding is that the APR rate is a way of expressing the actual amount of interest charged in a year as a percentage, so that consumers can make comparisons between accounts before "buying."


As such, it is technically not the actual rate used in calculating interest, which is usually slightly lower. However, we find ourselves using the APR rate when claiming, as that is the rate published by the banks. It would seem to be close enough to satisfy the Courts, so why go any further ?


It is probably best not to refer to it as "APR" in one's claim, as I don't think it is technically correct to calculate our interest directly from an APR, even though we are using the quoted APR rate for simplicity's sake. I have worded mine "...interest at an annual rate of xx.xx% compounded daily." I still used their quoted APR rates, but I just didn't call it that.


Hope that's of use !!! :-)

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Agreed, Sir - we're all just pitching in with whatever we know or think we know, and taking away what we think we can use. We must all test & evaluate it ourselves, for ourselves, before we trust it 100%, as has been done here with the monthly-to-annual rate formula, I believe.

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cool... no-one's ever tipped my scales before... do I get a prize?


I've only just found out what all that's about, Sir !! You get brownie points, but I'm still waiting for my catalogue to find out what I can redeem them for !!


Cheers, by the way, Sir & Chezt. I've learnt some stuff, too !!


Clicks all round, then !!! :-)

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No click from me, Glenn - that post was utter pants.


R U taking the P or donating it ? :grin:


We're all POSL, here, and when you see some of the banks' antics, I think those pants are a useful idea - as is the big slipper, Chezt !! :lol: I'm told when you get to 1000 points, you have enough for one of those 4WD shopping trolleys to cart your documents into court with.


Ahem - all this piddling around has made a mess of your thread, Glenn, sorry. Better mop up & get back on topic - er, whatever it was... :rolleyes:

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Or seek medical advice:rolleyes:




I'll just click with rubber gloves on, I think.


If you really want some fun, though, I've got a pair of those elbow-length ones somewhere. :eek: - I think THAT would be termed a PM in no uncertain terms !!


I dunno, I thought I had mopped up the mess before I went out, and look wot 'appens ? You're right, Glenn, this WAS your thread. "Glenn.....you've just LOST "Contractual Interest." !!! :grin: Next time, you better lock the cockpit door.


"Behold the monster I have created !"


I see you're platinum, mate (4WD shopping trolley level). Has anybody ever been demoted, yet ?

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Ahem.....I am presuming that you are a vet? in which case that's fine but just in case you are not.....please seek help:-| :p And, what the feck does PM stand for? (worried expression) I know it's not Personal Message:rolleyes:


No - wrong guess, Willow. Customs officer. :lol:


...and I MEANT "Personal Message." :grin:


Brilliant un-smiley !! There ya go Glenn - all yours !!! :p

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  • 2 weeks later...

Hi Sweetie,


Despite the impression the previous bunch of posts might have given you, they're a helpful bunch here !!! There are some clever sods on this forum, and some thickos like me, but between us all we seem to be able to achieve some awesome results. It takes a bit of time & effort, but it's well worth it.


Looks like you've got some reading up to do first, though !!! Check out these threads, and you'll probably find just about all you need to know - or all you WANNA know !!! :o








You'll be glad you did, I'm sure.


BTW I think Glenn will be pleased to see a relatively sensible post on here again, too, so thanks for that !!


Bill. :)

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Sweetie - Did I just get a click ? If so, thanx. But I didn't really earn it, as it seems you've done your groundwork, after all (been there - got the headache, eh? :cool: !!)


I have to confess that I ain't gonna be much help to you, here, as I never got charged a lot of O/D interest (smug sod :mad: ) - so I didn't bother trying to work out how to claim that. If it's not likely to amount to much, then I'm not inclined to bust a gut claiming it.


Have you used Vampiress's spreadsheets (in the Google facility) ? They seem to have all the columns for O/D interest. Also SirOweALot previously mentioned his spreadsheet, and Vamps showed interest in it, as Sir seems to have a good grasp of this. Maybe they'll stop by and give you some pointers.


Regarding specimen letters, templates, POC's, etc., I have found some posted by members in their own threads - but there are so many now, that it's like taking a solo row across the Pacific ocean in a rubber dinghy. But have a trawl sometime, and Save any useful posts.


I personally have found Mindzai & Lucid's contributions particularly useful, then there's AlanFromDerby, then....so many threads - so little time !!! ;)





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You got a click because sweetie's been watching you - you're all over the place, giving advice and encouragement and generally being a very nice gorilla. So the thanks wasn't just for responding so quickly and helpfully to me, but for all the good you generally do. Wish everyone was like that!



Well, thanks, sweetie - you're very kind.


I'm impressed that you've been watching me - it's not as though I have much to input factually, but I have taken so much away from this forum, though, that I feel obliged to contribute something in return. That's the way it works with a forum, I believe. Unfortunately, it's quantity rather than quality in my case, but it's the best I can do !! Biblically, I believe, the "Widow's Mite" is a New Testament equivalent of that, but I can't remember whose Gospel it comes from. Go on - show me you're not all bad - and tell me !!


Who are you claiming from yourself ? Perhaps we can share experiences - although I have to confess that (despite my avatar) I still have a lot to learn !! ;)


All the best from a fellow insomniac,


Bill. :-)

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