Credit card interest

Options
My statement says if I make the minimum payment of £58 the estimated interest applied to the card will be £33, so what happens if I pay £100 off the card?

Comments

  • [Deleted User]
    [Deleted User] Posts: 35,242 Forumite
    First Anniversary Photogenic Name Dropper First Post
    Options
    You'll pay £33 interest and £67 off the principal.
  • dantheman2010
    Options
    Ah I thought perhaps the amount of interest would be reduced. So no matter what I pay (other than the full balance) £33 gets added to the balance, nice.
  • [Deleted User]
    [Deleted User] Posts: 35,242 Forumite
    First Anniversary Photogenic Name Dropper First Post
    Options
    'Fraid not. The £33 is the cost of having borrowed the money for the last month. But making a larger payment obviously reduces the principal so your interest will be lower next month.
  • Jigga
    Jigga Posts: 167 Forumite
    Options
    And it’s an estimated interest figure because they don’t know what day you will pay your statement on and interest is calculated on a daily basis.
  • Fiddlestick
    Fiddlestick Posts: 2,339 Forumite
    Options
    Ah I thought perhaps the amount of interest would be reduced. So no matter what I pay (other than the full balance) £33 gets added to the balance, nice.

    That is incorrect.

    That £33 is ESTIMATED interest and the provider is going on the assumption that you will make payment on the very last day that the payment is due.

    Card interest is calculated daily but only actually applied to the account on the statement day.

    If you pay prior to the due date, there will be less principal when the interest is calculated so the actual interest applied to the account will be less than the estimated interest as the assumption that you will pay on the last day is not valid.

    Make sense?
  • YorkshireBoy
    YorkshireBoy Posts: 31,541 Forumite
    Name Dropper First Post First Anniversary
    Options
    ...the provider is going on the assumption that you will make payment on the very last day that the payment is due.
    ...and also that you won't put any more transactions on the account between the statement date and it's respective payment due date.
This discussion has been closed.
Meet your Ambassadors

Categories

  • All Categories
  • 343.7K Banking & Borrowing
  • 250.3K Reduce Debt & Boost Income
  • 450K Spending & Discounts
  • 235.9K Work, Benefits & Business
  • 608.9K Mortgages, Homes & Bills
  • 173.3K Life & Family
  • 248.5K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 15.9K Discuss & Feedback
  • 15.1K Coronavirus Support Boards