Contractual interest?

[sirowealot]

Glenn

 

Did you use MINDZAI's spreadsheet for a credit card claim? I noticed it specifically says not to be used for credit cards... what actual difference is there?

 

I'm definitely claiming for compounded contractual interest, but all my claims will be against credit card accounts rather than bank accounts and I'm a bit concerned that I'll be claiming for incorrect amounts.

 

SirOweALot

[sirowealot]

roydosan,

 

My MBNA rates are the same as well... the way I looked at it, it makes life easier as I only have one rate to worry about when working the interest rates out.

 

 

bill-k,

 

Thanks for your explaination in post #31 (I clicked your scales btw). I've been pulling my hair out trying to work out what rates to use and how to use them... but between you and Glenn UK I think it's quite clear... please correct me if I still misunderstand.

 

Apply the contractual rate in force (the one for purchases shown on your statement), stay away from the cash advance rate, and then if necessary argue in court that you used the APR/AER/contractual rate given by the credit card company as there was no way, as a layman, you could work out the specific underlying rate the bank actually uses.

 

One other question to throw in the mix. My First Direct rate was 0.82% when the first charge was made in 2002, and it rose roughly yearly to 1.01%, 1.24% rate now is 1.313% per month. Do we charge the contractual rate as 1.313% over the whole charge schedule, average it between 0.82% and 1.313%, or apply each one separately?

 

I can't seem to make a spreadsheet to work out a figure so I'm not sure if it makes a big enough difference that the courts will even care... what's yours or Glenn UK's take on this?

 

SirOweALot

[sirowealot]

I worked out the rate over the complete time period using my spreadsheet which varies the interest rate accordingly. If you are going to argue in court about the principle of mutuality and reciprocity then it only seems fair that you charge the same rate that they would charge you.

That seems a fair point to me too. After all, we're not out to screw the banks (although for all the grief some people have had, it must be on some people's minds), but rather to get back what was unlawfully taken in the first place. Interest on that is a bonus, but only in as much as that's what the banks would do to us anyway. That said, it's not fair to gain from the actions we are taking, but the balance should be redressed.

 

Vampiress, is it possible for you to amend your credit card spreadsheets to take into account variable interest rates?

 

SirOweALot

[sirowealot]

The other thing to consider is that there's 2 very different types of claims being made... one for bank accounts and one for credit cards.

 

Bank account interest rates have fallen over the years, and the courts may well take the fact that you're using a lower interest rate that has been applied previously i your favour.

 

Credit card interest rates however have risen over time, and the court could therefore argue that you are applying a higher interest rate than you are entitled to. This obviously works in our favour as its highly unlikely that the case would end up in court, but if you happen to be the unlucky one that does, wouldn't it go against you?

 

I'm very concerned by this... it's a pity we don't have someone in authority (any actuaries, barristers or financial gurus out there?) who could give a professional opinion... the difficulty would be that everyone's case is different, but surely there must be some guiding principles that we could all apply?

 

...but i think that simply taking the current rate is reasonable.

Glenn, that's fine as your opinion, but a judge may see it differently, that what I'm worried about.

 

In my view the argument for trying to work it out exactly is relevant.

Surely that's IRrelevant not relevant :grin:

 

If that's the case then how can you argue about a contractual rate and the principle of reciprocity and mutuality?

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.

 

SirOweALot

[sirowealot]

Chezt,

 

In your Genuine Answers link, I like the following statement after the APR Advantages bit

As you can see the above rates are all equivalent

:-) yeah, of course they are!!

 

I've always used the following calculation to convert monthly to annual interest rate (notice I don't say APR, "annual interest rate compounded monthly" or anything else like that as I honestly don't know what it converts to).

 

(1+0.018735)^12

where 1835 equals the monthly rate of 1.8735% (so 0.026 is 2.6% pm on the credit card statement).

 

Copy and paste the quote above into the google search box and it'll calculate it for you. Change the 18735 to whatever your monthly rate is, remebering to drop the "point".

 

The above quote gives 1.24949559, and by dropping the 1. you get 2494 etc or 24.94%. So 2.6% per month equals 1.36071863 or 36.07%. Not exactly as Chezt's APR stated on his statement, but certainly near enough.

 

I admire Glenn UK's tenacity at trying to get the calculations exactly right, but my (layman's) head hurts so I'm happy to get it nearly right... As I mentioned in an earlier post, I'm not out to screw the banks and I think that if a judge saw our feeble attempts at calculating interest rates he/she would probably find in our favour as long as we weren't too far out, and certainly under rather than over in our calculations.

 

I'll post my spreadsheet later... I'm not saying it's correct (it's bsed on one of Vamp's sheets but I've modified it to work out variable rates) but I'm hoping it's close enough. I'm happy to argue in court that it's the best I could do after doing a reasonable amount of research. I'm sure it's under-calculating (sorry Glenn ) but I'd rather it was this way... after all I'm still getting more than the statutory 8%.

 

SirOweALot

[sirowealot]

After writing the above, I did some further digging...

 

I used the interest rates from Chezt's Genuine Answers link above

APR advantages

Rate of interest can always be misleading. A ten percent annual interest can be made to look in thee different ways:

• 0.7974% effective monthly interest rate

• 9.569% annual interest rate compounded monthly

• 9.091% annual rate in advance.

As you can see the above rates are all equivalent but to a person who is a novice in finance it is totally misleading. APR helps to standardize how interest rates are compared, so that a 10% loan is not made to look cheaper by calling it a loan at "9.1% annually in advance"

(MY EMPHASIS IN BOLD)

 

Using my calculation from the last post I did this

 

(1+0.007974)^12

The answer is 1.09999816, or 9.9998%. Close enough to 10% APR as stated in the first line.

 

Does this help anyone? Certainly I feel better about using that calculation in my spreadsheet...

 

I should point out that I'm not an accountant, solicitor, bank manager or anything like that... these may just be the ramblings of a madman...

[sirowealot]

bill-k,

 

...nor anything Sir has to say

 

Whilst I'm flattered that something I've said might actually make sense, I thought I'd better just reiterate that I've got no training in anything that would be useful on this board... I'm an IT Consultant, not an accountant or anything else, as such anything I say shouldn't be taken as correct, it's just my own particular grasp on it.

 

 

That said, I agree absolutely with the whole of your post above... APR is nothing more than a way of making numpties like us understand SLIGHTLY more just how much the banks are trying to drain every penny from us. I've used the phrase "monthly interest rate" and "annual interest rate" when I've written letters, that way they can be interpreted differently depending on one's needs. Again, you could argue that as a layman you don't know anything different.

[sirowealot]

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