Interest rate calculation on cash withdrawals

sonny-67

Hi,

I wonder if someone can confirm my understanding of calculating interest charged on cash withdrawals.

If I were to withdraw £100 from an ATM, using a credit card with no cash withdrawal fee and where the interest rate charged for cash withdrawals was 27.5%, I presume that I would pay 7.5 pence per day until the balance was paid off.

27.5% divided by 365 = 0.075% per day

Note that there is a degree of rounding here, and I realise that the actual amount might be slightly higher.

So, if I were to make this withdrawal and then use internet banking to pay £100 to my credit card account, assuming 5 days for the money to arrive, I would pay 37.5 pence interest.

The reason I ask all this is because I am planning a trip abroad and want to use ATMs to get cash in the countries that I visit. MY travel is to outside of Europe, otherwise I would use my Nationwide Flexaccount debit card.

So, if I were to take out a Santander Zero credit card, with no cash withdrawal fee and make my withdrawals as above - immediately paying off the withdrawal, my charges would be as calculated.

I could obviously pre-empt the withdrawal and make the payment early in order to reduce the number of days before paying off the withdrawal, but I beleive that it is not possible to pre-load the card.

Using my calculations, this method would be cheaper than using my Nationwide debit card with its 1% usage fee.

Can anyone please confirm my assumptions.

Thanks

Paul_Herring

For the hassle this is probably going to cause wouldn't it be simpler to just carry on using your Nationwide card?

i.e. £1 per £100.

Is your time really worth the difference it's going to save you?

e.g. if you withdraw £500 worth of currency, that's going to cost you £5. Minus what it would cost you on the other card (say £2 rounding your calculations up.)

Is the time spent looking for a secure internet connection, logging on, moving the money, hoping it gets there 'in time' worth that £3 per £500, or is your time worth more than that?

sonny-67

Thanks for the response. I presume that you agree with my calculations?

I see what you are saying and it has made me wonder whether it is worth the hassle.

I am budgeting for about £3000 spending on the trip, so it could be a saving approaching £30. Whether my time is worth that is a matter for debate but, as all money saving experts will testify - every little helps.:D

However, realistically, I guess my spending is more likely to be a split between paying by card and withdrawing cash - with the former being the higher percentage. As the former will incurr no fees or interest if paid off in full, then the amount of savings is reducing.

Thanks again for your response.

TrickyDicky

Also remember - if there is an existing balance any money paid to the account will be used to pay off the cheapest debt first - so as an example:

you have £1k already on the card at 0% (cos its within the 56 days interest free). You withdraw £1k from a cash machine (at 27.5%) and pay £1000 straight into your account. This 1k pays off the interest free stuff, leaving £1000 to have interest charged on it at 27.5% until you pay the balance off, then you have the residual interest to pay too.

sonny-67

Thanks TrickyDicky.

I was aware of that and I don't intend to have any balance on the card before I use it abroad.

I don't even have the card yet and, from what I've heard, I'll be lucky if they process my application in the 56 days I have left before I go!