'I paid off my Virgin credit card TWICE but got hit with £100 in charges': How phantom interest can ruin your credit score

You would think paying off a credit card would be as simple as checking the remaining balance, and coughing up that amount.
But one This is Money reader found that a card he had assumed had been cleared had a sting in the tail - and would end up costing him more than £100 in sneaky charges months down the line.
Last January, Mark Zimmerling paid off the remaining £3,895.76 he saw was left on his Virgin/MBNA card, the remainder of a balance transfer made a year and half earlier.

Credit car woe: Mr Zimmerling has been left out of pocket and seen a blotch on his credit record after MBNA/Virgin troubles

He assumed the account was then closed. Unfortunately, he didn’t realise that interest had accrued in the time between the balance he saw was issued, and the date he paid.
The first he learned of this was four months later when Virgin/MBNA contacted him to tell him he owed £9.30 interest and a £12 late payment fee for missing the payment - a total of £21.30.

He stated his case over the telephone but decided the best course of action was to pay this off so the account was up-to-date and closed - something he says MBNA/Virgin confirmed to him at the time was the case.
However, in June, he received another letter advising he had missed more payments, with further interest and late payment charges added, to the tune of £36.61.
This was followed by an email telling him his name would be registered with the credit reference agency as a defaulter.

Credit record: Mr Zimmerling says the debacle has dragged his credit rating down

Exasperated, Mr Zimmerling spoke to ’20 different advisers’ to sort the spiraling situation. He also wrote to them stating his case.

He requested that further charges be put on hold until a resolution was found but says this was refused. The fees and interest continued to mount until, in November, Mr Zimmerling received a request for a further £86.20, made up of seven £12 late payment charges plus interest.

It took the amount demanded by Virgin/MBNA overall to £154.11. Potentially even more costly was the damage done to his credit rating. He says his credit worthiness has been ‘ruined’ by the affair, with one agency now rating him as 'very poor’ despite never being in arrears with his mortgage or other credit card before.
He has taken his case to the Financial Ombudsman Service (FOS) but it has told him it could take a further six months to process.
Mr Zimmerling said: ‘I think this is all grossly unfair, unjust and surely not good banking practice. They have been negligent in not advising of the consequences and have racked up their charges because of this.'

This is Money takes up the case

On Friday 18 January 2013 This is Money contacted Virgin about Mr Zimmerling's case, and the company said it would investigate.
A spokesman explained the appearance of the unforeseen interest payments. He said: ‘Because we calculate interest on a daily basis, the balance can change between the customer making the payment and it being credited to their account.
‘This is standard practice across the industry, and any difference is carried over to a customer's next statement.
‘As happened in this case, if this is not paid then interest and charges can begin to accumulate, which is why we encourage all of our customers to check their statements every month and open the letters, read the text messages or respond to the calls we make.’
However, it agreed it could have done more to deal with the issue more effectively, and promised to review the case internally.
It also said that despite the fact the issue is being decided upon by the FOS, it will reimburse the fees and charges, and will also make necessary amendments to the credit file.

VIRGIN MONEY TAKES CREDIT CARDS IN-HOUSE IN BID TO TAKE ON BANKS

Virgin Money stepped up its efforts to become a rival to high street banks with a £1billion deal to run a portion of its credit cards itself.
Virgin announced at the weekend that it would scale down a tie-up with MBNA, a division of Bank of America, and confirmed it mean the purchase £1billion of assets in the process.
While it will still have £2billion of credit card accounts run by MBNA, Virgin did not rule out taking these in house in future as well.
Virgin is expected to launch its own current account before the end of the year that will extend its banking bid even further.