Credit Card Interest - how is it calculated?

Manuel

Call me stoopid, but I still have problems getting my head around this.

My Bank's Credit Card booklet gives one the impression (IMO) that if you clear the previous month's debt, you don't pay interest.

Now I know this is not the case. On this month's statement:

Previous balance : 1142.40
Payments (since) : 1250.00
Purchase Interest : 19.70

On what is this interest figure based, can somebody pleeease explain?

Thanks,
/M.

Jesus Wept

Manuel wrote: »

My Bank's Credit Card booklet gives one the impression (IMO) that if you clear the previous month's debt, you don't pay interest.

Now I know this is not the case.

It is the case.
Did you pay it on time? What date was it due and what date did you sent payment and by what method? Could it of been a bit late?

Manuel

Hi Rigger,
These repayments show up on my statement, so how could they be late?
As it happens, I paid 500 early in the month, 500 in the middle of the month and 250 a couple of days before the statement was due.

So even if the 3rd payment was late, that would mean I got charged 19.70 on an outstanding balance of 142.40.

But ok, you might have put your finger on it. When my statement gives me a minimum repayment (~40.00 or whatever) and a repayment due date, are you saying I have to repay the entire amount by that date to avoid interest? I always thought that due date only applied to the minimum repayment ...

/M.

BuffyBot

If you only pay the minimum, you'll be charged interest on the remaining balance.

If you clear the entire balance, you pay no interest

unclebill98

If you do not clear the balance you get charged interest on the entire amount...not the remaining balance. Found out that today...

Jesus Wept

unclebill98 wrote: »

If you do not clear the balance you get charged interest on the entire amount...not the remaining balance. Found out that today...

....really? That's bizarre.

broker2008

This is how MBNA make all their money. Always pay at least the minimum and try so hard to always clear monthly otherwise they screw you. I know of someone who has 2 MBNA credit cards and they lodge an MBNA cheque from one account into their bank account and use this money to pay off their main credit card account in full. The clock is then ticking on the credit card cheque from that date but they aim to pay that off in full too. If you do not have discipline this can be as expensive though. If he is particularly stretched he rings MBNA and tells them that he is considering a Halifax card etc and they reduce the interest rate on one of the cards which allows them use the credit card cheque as short term low cost debt. Always pay loans off with the highest interest rate first. So pay credit card debt off first with available cash, low interest deals, credit union loan, overdraft. loan from work etc.

unclebill98

The-Rigger wrote: »

....really? That's bizarre.

Yep, 56 days interest free, only if the balance is paid off in full by the due date...its in the small print

Davy

Just to add if you use credit card cheques or use it for cash, you are charged interest from that day till its paid even if its cleared in full