How HSBC Calculates Finance Charges for Credit Cards

|

If you are using one of HSBC Credit Cards or planning to get a HSBC Credit Card soon, it is worth to know how HSBC Bank is calculating financial charges. You can maximise your credit card benefits by understanding the calculation methods used by HSBC. Before going into the calculation methods, if you haven’t used any credit cards yet or planning to get another card or would like to change to another, here you can read more details about how to choose your best credit card.

HSBC Credit Cards‘ Interest Rate : 24% per year.
Late Payment Fee : Rs. 900.00
Payment Due Date : 21-November-2016
Current Billing Date : 30-November-2016
Previous Billing Date : 31-October-2016

Financial charges for partial payment

Generally, HSBC Financial Charges are calculated daily on each card transaction from the original date of the transaction until the date on which the total Closing Balance is settled or till the next statement date, at a rate to be determined by the Bank. This Financial Charge will be debited to your card account on the subsequent Statement Date. If you pay in full before the due date there will be no financial charges for your credit card purchases, but for cash advanced and balance transfer, you will.

Lets consider following transaction details:

Date Description Amount
1 October 2016 Opening Balance Rs 0.00
5 October 2016 Purchase Rs 21,000.00
18 October 2016 Purchase Rs 20,000.00
31 October 2016 Closing Balance (Total Outstanding) Rs 41,000.00
 
1 November 2016 Opening Balance Rs 41,000.00
10 November 2016 Payment made Rs 15,000.00
23 November 2016 Payment made Rs 7,000.00

This Card Holder does not pay the full amount by the due date, but has made two partial payments. Therefore the bank will impose an financial charge which will be calculated as follows:

1. Interest Calculation for the transactions:

A Rs 21,000.00 X 24% /365 X 27 days (5/10/2016 – 31/10/2016) Rs 372.82
B Rs 20,000.00 X 24% /365 X 14 days (18/10/2016 – 31/10/2016) Rs 184.11
Interest Component 1 = (A + B) Rs. 556.93

2. Interest calculation for the statement outstanding balance:

C Rs 41,000.00 X 24% /365 X 10 days (1/11/2016 – 10/11/2016) Rs 269.59
Interest Component 2 Rs 269.59

3. Interest calculation for the period after the payments was made up to the next statement date:

D Rs 26,000.00 (Rs 41,000.00 – Rs 15,000.00) X 24% /365 X 14 days (10/11/2016 – 23/11/2016) Rs 239.34
E Rs 19,000.00 (Rs 26,000.00 – Rs 7,000.00) X 24% /365 X 8 days (23/11/2016 – 30/11/2016) Rs 99.94
Interest Component 3 = (D + E) Rs 339.28

4. Put it all together:

Total financial charges = Interest 1 + Interest 2 + Interest 3 Rs 1,165.80

Financial charges for partial payment made after the due date

Following calculation will be use if you paid your payments after the due date. Lets consider following transaction details:

Date Description Amount
1 October 2016 Card Opening Balance Rs 0.00
5 October 2016 Purchase Rs 21,000.00
18 October 2016 Purchase Rs 20,000.00
31 October 2016 Closing Balance (Total Outstanding) Rs 41,000.00
 
1 November 2016 Opening Balance Rs 41,000.00
25 November 2016 Payment made Rs 10,000.00

Here in this example, customer pays Rs 22,000.00 of the outstanding balance on 25 November – one day after the payment due date.

1. Interest Calculation for the transactions:

A Rs 21,000.00 X 24% /365 X 27 days (5/10/2016 – 31/10/2016) Rs 372.82
B Rs 20,000.00 X 24% /365 X 14 days (18/10/2016 – 31/10/2016) Rs 184.11
Interest Component 1 = (A + B) Rs. 556.93

2. Interest calculation for the statement outstanding balance:

C Rs 41,000.00 X 24% /365 X 24 days (1/11/2016 – 25/11/2016) Rs 647.01
Interest Component 2 Rs 647.01

3. Interest calculation for the period after the first payment on 25 November up to the next statement date:

D Rs 19,000.00 (Rs 41,000.00 – Rs 22,000.00) X 24% /365 X 5 days (26/11/2016 – 30/11/2016) Rs 62.47
Interest Component 3 Rs 62.47

4. Put it all together:

Note: If the Minimum Payment is not paid on or before the due date, the credit card Account will be levied with a Late Payment Fee of Rs.900.00 along with interest.

Late Payment Fee Rs 900.00
Total financial charges = Interest 1 + Interest 2 + Interest 3 + Late Payment Fee Rs 2,166.41

Stamp Duty

You need to be aware about Stamp Duty when you are doing any purchase outside Sri Lanka (including online). With effect from 01 January 2016, Stamp Duty will be charged only for your Credit Card transactions performed at merchants based outside Sri Lanka. The new Stamp Duty is charged at Rs 25.00 for every Rs 1,000.00 or part for all such transactions.

By considering above two situations, you can simply understand the benefits by paying the full amount before the Due Date. If you can’t pay full amount within the due date, at-least try to pay as much as you can to lower your financial charges.

Shanuka Wijeratne

Shanuka is a contributing writer at Moneta.lk. She is a curious traveller and careful spender who keeps her busy to find-out the best Credit Card promotions and deals in the city to help other people to save money by getting the best bang for the buck.

Leave your comment