How does credit card interest work?

nao_3

Hi there

I have just had a confusing conversation with the Royal Bank of Scotland Credit Card department (I know - not the best value card, but i've moved house so many times recently I can only get one from my bank).

This month I spent about £730 on my card and paid off £650, leaving me with a balance of £81.08 on the day when interest is paid. I assumed that I would therefore pay interest on that £81.08 only (a couple of quid I thought). However, £12.13 interest was added to my account.

I called and spoke to their helpline and the lady 'explained' that if you don't pay off your balance in full you then pay interest on everything from that period, not just the outstanding balance, as you forfeit your right to not paying interest. Is this correct? To me it sounds outrageous and wrong as you shouldn't pay interest on money that you have paid back. :mad:

I am going to get back to the RBS about this but I was wondering if anyone has some formal info on this, as i would like to go to them with all the facts as this will strengthen my argument?

Thanks in advance!

nao

Rafter

This is very standard and applies to most credit cards.

If you pay the balance in full you pay no interest.

If you pay even a penny less you pay full interest from the date of the transaction AND you pay interest on next months transactions too.

It is how credit card companies make so much money!

You have no comeback against RBS, but I suggest you start paying your credit card bill in full and using a loan or overdraft for 'real' borrowing, to avoid getting stung by these interest rules.

Fingers crossed you can get a better credit card in a few months!

R.

grumbler

nao wrote:

To me it sounds outrageous and wrong as you shouldn't pay interest on money that you have paid back. :mad:

You pay interest only for the period when you actually owe money: from the date of transaction till the date when you pay back. Then you pay interes on the unpaid balance and on all new purchases - untill you pay balance in full.
Summary Box :

Interest Free Period - Maximum 59 days for purchases if you pay your balance in full and on time, and have paid the previous month’s balance in full and on time - no interest free period on cheques, cash advances or money transfers. Interest free period on balance transfers only applies to the introductory period.

If you don't pay balance in full you lose privilege of having up to 59 days interest-free period on purchases. This is common for all credit cards.

See also 'Fuming with Nat West Visa!' recent thread.

Robert_Sterling_3

You will learn from your mistake at a cost of about a tenner.
Happier are those who learn from other people's mistakes at no cost to themselves.