An Irish Times guide to the world of personal finance.
SSIAs
If a bank erroneously stopped a direct debit that was set up to pay money into an SSIA account, with the result that the account was closed and a penalty levied by the Government, what are the chances of this account being re-opened? Are the doors closed regardless of circumstances or is there an appeal process within the Department of Finance? As the bank admits making the error, must the customer be at a loss in such a situation? - Ms N.P., Dublin
The key is in the last part of your letter - if the bank admits the mistake, it would be surprising that the customer would pay the penalty. As such, it will come as little surprise to you to know that there is a way of reactivating a special savings incentive account (SSIA) in circumstances where a direct debit paying into the account has been blocked in error. Actually, I'm surprised the bank itself was not able to proactively inform you of this because both the Revenue Commissioners and the Irish Bankers' Federation were quickly able to assure me that your SSIA account should not be in jeopardy in such a situation. Unfortunately, getting the correct information at bank counters seems to be an increasing problem for whatever reason. It was always likely that the odd glitch like this would occur where so many accounts are concerned and it was a scenario both the institutions and the Revenue allowed for.
Anyway, you need to contact the bank on which the direct debit is drawn as soon as possible and get it to contact the institution where your SSIA is based, if different. On the basis of what you have said - that the bank accepts it acted in error in not honouring the direct debit - your SSIA should be reactivated and paid up in full (including the missed payment due to the error) with no exposure to any penalty for early closure.
Credit cards
As a reader of your Friday column I would like to share with you my concerns on the way MBNA charges interests on the outstanding balances left on the accounts. Apparently they charge interests on the whole balance until the last cent has been paid off.
I am not sure if this is a common policy in Ireland but it is the first time I have come across it and I would like to hear your opinion on it. This is my case: On June 7th I received a bill of €409.86 (payment due by July 3rd). On June 20th I paid off €400 (by mistake) leaving an outstanding balance of €9.86. On July 7th I received new bill with a charge of €8.85 for interest (which works out to be correct if interest is calculated on the whole €409.86 balance).
I rang MBNA and I was told that it was correct and they even promised me to send a leaflet with information on the issue, but I only received a useless leaflet with no such information. I asked also to receive a detailed account of the way interests were charged on my specific case and they refused to do so. Is this a common practice? - Mr M.B., Dublin
Well, there is no excuse for MBNA - or indeed any other card-issuer - not explaining to a customer how the figures tot up in a case like this where there is confusion. Sending out unhelpful, incomplete or even irrelevant information is equally not the sign of an institution with a proper focus on customer care. However, as to your main gripe, I am sorry to say it appears to be fairly common practice for card-issuers to charge interest on the full amount of the bill if it is not paid off in full at the end of each month. Not only that but most charge interest on each card transaction from the date of the transaction and not from the end of the month.
That is precisely why so many people get into trouble with credit card debt and illustrates the importance of paying off the full amount of any card bill each month - even by recourse to an overdraft, with its lower interest rate. The best way to do this is by direct debit because it reduces the room for error in timing or amount. By the way, on the subject of the practices of card issuers, you should also note that most will charge interest on cash withdrawals from the date of the withdrawal regardless of whether the bill is paid off at the end of the month.
As for what I think, I think it stinks. Card-issuers are making it from both retailers and customers and the interest rates charged on cards in Ireland are little short of usurious. That is why, if you do have a credit card, you should read all the small print very carefully to make sure you are aware of all the pitfalls of whichever one you use. And of course, you should pay your bill off at the end of each month, whatever it takes. I know this does not apply to you (as you said, you did intend to pay off the full bill) but if you cannot afford to do that, you probably cannot afford to have a credit card in the first place.
Smurfit takeover
I am confused about the Smurfit takeover. I have recently read about a second deadline passing and even a third deadline upcoming, yet I understood that enough people had accepted the offer by Madison Dearborn by the first deadline for it to be made unconditional. What is happening? It sounds to me like a scam to hold on to our shares for longer without paying us our money. - Mr B.McC., Dublin
As you say, Madison Dearborn Partners did get more than the 80 per cent approval it needed first time out to declare the offer unconditional. However, getting the required number of shares is just one element of the deal. Smurfit needed to get court approval of changes in its rules allowing the hiving off of the Smurfit Stone Container Corporation part of the business before sealing the deal. The deal would also need approval from regulatory authorities and the relevant exchanges although this is not an issue here really as the Smurfit deal is not a trade sale raising competition issues.
It being summer, it has taken some time to tie up all these ends and Madison Dearborn has therefore been keeping open its offer in a bid to mop up the remaining shares.
The thinking is that people who were holding out in the hope that the offer would be defeated would see the writing on the wall and sell their shares voluntarily before the offer went unconditional, which it did last Tuesday (September 3rd). As the company tells it, taking up the offer before it goes unconditional means that you will get your money more quickly as all the paperwork was completed by the time the offer went unconditional.
But as you say, once you have accepted the offer and sent in your share certificate, you do not have control over your holding. That should not make much difference in the current circumstances. You knew the offer was going unconditional and the price for the shares in the open market reflected this certainty. It may be a little inconvenient for people banking on having the money to hand for, say, college entry or whatever, but that's not a scam; it's simply the way these things work. It was the same with Eircom, Green and any other company taken over. If you needed the money by a particular date, you really should not have waited for the takeover to play out.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, D'Olier Street, Dublin 2 or e-mail to dcoyle@irish-times.ie. This column is a reader service and is not intended to replace professional advice. Due to the volume of mail, there may be a delay in answering queries. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.
