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How/When is interest calculated?
MustangSally
Posts: 31 Forumite
in Credit cards
I'm trying to work out when credit card interest is calculated but I cannot get my assumptions to match up with what's on my statement. I'm only out by pennies, but pennies matter!
I've always thought that interest is calculated on the amount outstanding at the statement date, hence the 50-something days "interest free" period.
The reason for this is that I have a lump sum of £4k to pay off a credit card balance (£7k). Should I leave the £4k in my savings account (where interest is calculated on a daily basis) and then pay it into the credit card account just before my statement date. Or, is it best to just pay it into the credit card account now!
Any advice/explanation gratefully appreciated as both my brain and my calculator are about to explode!!
I've always thought that interest is calculated on the amount outstanding at the statement date, hence the 50-something days "interest free" period.
The reason for this is that I have a lump sum of £4k to pay off a credit card balance (£7k). Should I leave the £4k in my savings account (where interest is calculated on a daily basis) and then pay it into the credit card account just before my statement date. Or, is it best to just pay it into the credit card account now!
Any advice/explanation gratefully appreciated as both my brain and my calculator are about to explode!!
Cleared £23,848.22 of debt between Jan 2008 and September 2009. Now a saver rather than a spender!
0
Comments
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Interest is usually calculated daily, on the daily closing balance, at the annual simple rate divided by 365.
Due to the difference in interest rates paid/earned, it's better to pay down debt than to save (once you have an adequate safety cushion of course).0 -
Thanks for that. I hadn't even considered it might be a daily calculation!! I'll be so much more vigilant now in paying off little bits rather than building up lump sums!!
Cleared £23,848.22 of debt between Jan 2008 and September 2009. Now a saver rather than a spender!0
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