When you have an offset account linked to your home loan, the money in the offset account acts to reduce the interest that your loan accumulates.

Example

Your loan balance is $500,000
Your offset account balance is $10,000
The amount we calculate interest on is $490,000.

Sometimes when you have pending transactions on your account – which is money that was deducted when you made a purchase on your card but hasn’t yet been claimed by the seller – your offset balance will not reflect correctly at the time your loan interest is calculated.

Later, when those pending transactions are cleared and claimed by the seller, your offset balance updates and is effective for the date the transaction was made. The system then recalculates the correct amount of interest that should have been charged to your loan, using the offset account balance updated with the now-cleared pending transactions.

That’s why you’ll see your loan interest reversed and a new interest amount charged to your loan when your loan interest is calculated. The difference in amount is likely to only be a few cents.

Example scenario

On 26 December 2019, five transactions totalling $40 were made using the offset account card. These were made using PayPass and the transactions are pending on your account. This means that the offset account balance hasn’t had the $40 deducted from it even though the goods were purchased.

On the 31 December 2019 when the loan repayment is due the system calculates the interest amount and charges this to the loan. The five transactions from Boxing Day are still pending, so the offset balance amount that we used to calculate the amount of interest to charge to the loan was incorrect (it didn’t include the $40 of funds already spent).

On 4 January 2020, the five transactions from Boxing Day that were pending become cleared in the offset account. The offset account balance is then reduced by the $40 spent and this new balance is made effective from 26 December 2019 – the day the transactions are made.

Because the offset balance was $40 less on 31 December than the balance that we used to calculate the interest amount, the system reverses the amount of interest that was charged to the loan and then recalculates the correct interest amount using the updated offset balance. In this example, using a loan balance of $500,000, an offset balance of $10,000 and an interest rate of 4%p.a. the difference in the loan interest charge would be approximately 3 cents.

In summary, the reason you see the loan interest reversal and a new loan interest charge amount is to correct the amount of interest that was charged to your loan to account for any pending transactions on your offset account.


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