Credit Card Statement Interest Explained??

SciNeT · 8 May 2010 at 14:36

Can anyone tell me what I have to do here? I have a credit card and always pay off the full balance each month, done this for years.

Start of this year my issuing bank offered a 0% interest January sale thing for 3 months. I didn't have to do anything to qualify so for the first time ever I only paid the minimum amount rather than the full amount & sure enough the next statement came with 0% APR and no interest charged on the outstanding balance. This balance started to increase month on month naturally. OK, now I messed up, paid the minimum again end of last month but of course the promotion had ended, I hadn't spotted it...

Get my statement yesterday and the APR is back to 15.9% and I have been charged interest... fair enough, my fault - BUT am I in a chain/trap now? I propose to pay the FULL amount off at the statement due date, around the 20th of this month, but am I accruing interest daily now? In other words if I pay the full outstanding amount off on/before the due date will my next statement ALSO have interest added? If so, how do I stop the chain??

Immsy · 8 May 2010 at 14:51

Give them a call on the 20th and ask what the total balance is up to that date and then pay it, there making total balance zero and no more interest.

platinum87 · 8 May 2010 at 14:55

Cash withdrawls get interest from day one, doesnt matter if you pay it off at the end of the month, so do deposits to gambling websites etc and a few other things

Raymond Lin · 8 May 2010 at 14:56

If the start of the month and your balance is 0.

You go out and buy a pair of jeans and the bill comes, you pay it off, you pay 0 interest. Every month thereafter is 15.9%. And the interest is calculated daily.

I found out the hard way last month, I used it to buy plane tickets for the family and then got each of the monies from my family and put it back on my card. All done within the 4 weeks of the statement, but between paying for the plane ticket and paying it off with cheques, I was paying interests for £2.5k of debt/plane tickets, even though within that period i did not have a statement.

Think of it as a loan, the day you take it out is the day you start paying interst. However, if the balance of my card was 0 when I bought those plane tickets then I would have not incur any interest.

SciNeT · 8 May 2010 at 15:36

Thanks for the tips, this is a bit of a s*d. What I am concerned about is the statement I received yesterday lists all transactions up until the 2nd May & I have been charged interest on this total I thought. No problem, my fault.

BUT - what about the transactions AFTER the 2nd now? I've had diesel this week, shopping & have charged £900 to the card yesterday - am I paying interest on these items now, and all subsequent purchases??

If so, I could potentially continue to pay the full balance off every month, like I have done for years, but be charged interest each month from now on! If this is the case I'm going to have to cancel the card, pay the balance at point of cancellation I presume, then re-apply just to reset everything. What a sneaky promotion.. :mad:

Raymond Lin · 8 May 2010 at 15:47

The only way to get o interest is at the start of the statement the balance is 0.

Even if its 1p, and you go spend £1k, you'll get charged interest on it.

If the start of the statement is 0 and you spend £1k, you don't have to pay interest if you pay it off when the bill comes.

mrmoose · 8 May 2010 at 16:14

It's to do with the ending of the promotional period. Typically promotions finish on the statement date - the day in which it is physically printed and sent out, not the payment due date. which is why you needed to clear the balance before the 3rd statement.

The only thing you can now do is clear the balance and expect there to be a residual interest amount on the next statement as well.

edt.....

sorry but you dont need to cancel anything. Just pay in full this month and wait for the next statement. There will be a small interest charge again and you need to pay that balance in full to get back to where you started.

You need to pay 2 consecutive statements in full to get back the grace period for the purchases.

Flying Gribble · 8 May 2010 at 16:24

To minimise the interest that you pay don't wait until the payment due date of this latest statement before paying - do it ASAP. Otherwise you'll get charged interest on a larger amount between now and then. You will be paying interest on your purchases since 2nd, so if you can pay those off as well.

SciNeT · 8 May 2010 at 16:28

Well I have spoken to the bank and been told if I pay the total balance off as printed on the statement (my actual outstanding balance is higher than this printed figure now due to additional purchases since the date of the statement) then there will be no interest added on the next statement.

Will keep an eye on this though - thanks for all the advice!

SciNeT · 8 May 2010 at 16:31

Flying Gribble said:
To minimise the interest that you pay don't wait until the payment due date of this latest statement before paying - do it ASAP. Otherwise you'll get charged interest on a larger amount between now and then. You will be paying interest on your purchases since 2nd, so if you can pay those off as well.

Yes, this is exactly what I am worried about, and this from mrmoose :

"You need to pay 2 consecutive statements in full to get back the grace period for the purchases. "

But have been told this won't happen... easy to say though... Will find out next month I guess, lesson hard learned if so. :mad:

drunkenmaster · 8 May 2010 at 16:34

You shouldn't be charged any extra in interest for new purchases even if you're paying interest on the rest of the balance. New purchases should only start to build interest after the due date on the bill you get after buying the items.

Also, the safe option is to overpay, theres nothing wrong with doing that, then the next bill part of it would already be paid. So overpay by £20 for safety and next bill will have £20 credit against purchases.

( |-| |2 ][ $ · 9 May 2010 at 11:18

drunkenmaster said:
You shouldn't be charged any extra in interest for new purchases even if you're paying interest on the rest of the balance. New purchases should only start to build interest after the due date on the bill you get after buying the items.

This is correct. Pay the amount shown on your latest bill in full and next month you won't be charged any interest at all. (unless you withdrawn cash etc)

It's not difficult.