Question about interest CC

musashi10

This is probably a stupid question but here goes.

I want to start getting my finances in order.

I was looking at my credit card statements and it says on there I pay 2 different types of interest. Standard and purchase.

Now I know the definition of each, but I was wondering how it would work if I paid off my balances in full each month every month and what that means to me.

So as a working example (apologies if I get this all wrong).

I get a credit card with £0 balance.

I buy something for £100 M1
M2 I pay off £100

Standard interest is 20%
Purchase interest is 10%

Is my balance M2 now £0 because I have paid in full? or is it£10 because of the purchase interest?

IS there anyway to avoid paying interest for ccs?

Any help understanding this would be great

[Deleted User]

If you pay off in full each month, then you will not pay any interest.

The only exception to this is cash withdrawals, which is charged from date of transaction.

musashi10

Thanks mate.

So that means that I don't understand the definition of purchase interest. Could you help please? Why do I not pay interest for purchasing? Why is there a split in interest rates?

[Deleted User]

You'll have (probably) two rates. One for purchases (ie stuff you buy in shops) and balance transfers (assuming no promo rates). And one (higher one) for cash, cheques and cash like transactions - buying currency, gambling, etc.

Cash is charged at a higher rate AND incurs interest immediately because.....well, basically because it just does. Cash users are generally seen as more risky than non cash users, so are charged higher amounts.

In general, use your debit card for cash, and your credit card for Tesco's, and pay off in full each month. Then everything will be hunkydory.

Tixy

Nearly all credit cards have a clause that they waiver the interest payment if you pay the whole balance due.

So if you purchase something 1 month, your statement is generated and you pay the whole balance before the due date, they waiver the interest.
If you don't pay the whole balance - you are charged interest on the whole balance from the date of purchase.

You would need to look at your credit card terms & conditions to see that that card defines as standard transactions.

JimmyTheWig

musashi10 wrote: »

So that means that I don't understand the definition of purchase interest. Could you help please? Why do I not pay interest for purchasing?

You will pay interest on purchases if you don't pay the statement balance in full each month.
If you don't pay in full each month then you will pay the purchase interest rate on purchases made from the purchase date until it is paid.

Some people set up a direct debit to pay the balance in full each month. This means they never forget / get it wrong / pay too late and get charged interest.

katalinetball

Hi all
I am new to these forums so please forgive me for hijacking this post but could not work out how to send my own question.

Can anyone tell me why I am charged interest.

I put a balance transfer on my credit card and also still make purchases. Every month I pay off the purchases made and put something towards the balance transfer, but I am being charged interest every month and when I queried it was told it was because I don't pay the full balance. Does this not mean technically I am not getting a 0% rate on my balance transfer?
Hope that all makes sense. Thanks

dzug1

katalinetball wrote: »

Hi all
I am new to these forums so please forgive me for hijacking this post but could not work out how to send my own question.

Can anyone tell me why I am charged interest.

I put a balance transfer on my credit card and also still make purchases. Every month I pay off the purchases made and put something towards the balance transfer, but I am being charged interest every month and when I queried it was told it was because I don't pay the full balance. Does this not mean technically I am not getting a 0% rate on my balance transfer?
Hope that all makes sense. Thanks

No it doesn't - not technically. You might like to view it that way though.

What you are not getting is interest free purchases

It's normally a Bad Idea to mix purchases and balance transfer on the same card

To post a new thread you have to be in the index page of the forum you want to post in, not in the messages themselves. Above the list of threads will be a 'New Thread' button

katalinetball

Thank you dzug1 for your reply and for your help in navigating the forum. I'm just annoyed with myself that I didn't understand that I would be charged for still buying on my card even tough I pay it off every month. Now I've found this forum I will get advice before I get stung again!!!