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Last Updated: Saturday, 10 July, 2004, 11:07 GMT 12:07 UK
Credit card practice 'abominable'
By Samantha Washington
BBC Radio 4's Money Box

Credit card
A leading credit card company is charging its customers interest for cash withdrawals even when the bill is paid in full each month.

Because of the way Capital One statements are drawn up, it is unclear to customers that they are not paying off the cash withdrawal while they continue to use the card to buy things.

But they are being charged daily interest - usually at a rate of 20.5% - on all cash withdrawals made from machines.

This practice has been happening for six months and Capital One said it notified all customers in advance when it made the change to the way it charges interest and takes payments.

Complex rules

The new practice was not clear to Graham. He contacted BBC Radio 4's Money Box programme to say that he felt it was a "mortal sin" not to pay his balance in full.

Yet he was puzzled when he eventually noticed an interest charge on his statements.

When he called Capital One he was astonished to learn he still owed 30 of the original 50 he took out six months previously.

The interest was the amount added on daily on the unpaid cash. His payment in full had not covered the money he took out because of the complex new rules.

If in one month a customer has spent 100 on their card, and also took out 50 in cash, their statement would show a total to pay of 150.

This is one of the most abominable practices I have ever seen in the credit card market
Money Saving Expert Martin Lewis
If that customer then sends in 150 by the due date, Capital One will take the money and pay off the 100 of goods.

That leaves 50, which you might think pays off the cash amount. But that is the snag.

Capital One the uses the 50 to pay off anything that is bought more recently with the card, even after the statement is issued.

Only if there is anything left after that does any of what you are paying to settle your monthly bill go towards paying off the cash withdrawal.

The result is that as long as you keep using the card the cash amount might never be paid off, or only be paid off slowly.

To make matters more complicated, card holders will not ever see the unpaid cash amount on future statements.


Capital One told the programme the rule change would have a "minimal effect" on its cardholders.

But credit card expert Martin Lewis is deeply concerned by Capital One's treatment of customers.

He told the programme:

The worry is other providers will see it as a nice money-maker and jump on the bandwagon
Mr Lewis

"This is one of the most abominable practices I have ever seen in the credit card market. I have never heard of this being done before and cannot find any other examples. It should be made illegal."

Mr Lewis is worried that unless this practice is stopped, Capital One could start a trend.

He continued: "The worry is other providers will see it as a nice money-maker and jump on the bandwagon."

What to do

If you have used your Capital One credit card for cash, Money Box's advice is to read your statements carefully.

If you do notice unexpected cash interest on your statement, phone Capital One and ask them for a "settlement figure". This will include the unpaid cash advance.

But, if you use your card before the payment is processed, you will be back to square one.

If you do use your card for cash, put the card away for two months after sending your payment. Only then can you be certain that the cash advance has been paid off.

BBC Radio 4's Money Box was broadcast on Saturday, 10 July, 2004, at 1204 BST.

The programme was repeated on Sunday, 11 July, 2004 at 2102 BST.

Money Box



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