The best tactic for paying off a credit card

Buster1874

A hypothetical question that puzzles me, and I suppose that it depends how interest is calculated is:

I have £200. Do I pay £100 off on a credit card and use the rest of the money in the month to buy petrol for instance...Or pay the £200 off on the card straight away..and use my card to buy £100 petrol during the month..as and when required? Over the month..I suppose my outstanding balance average is lower..so will that create a slightly reduced interest charge even though net spending at month end is exactly the same. Thanks.

StuC75

If the credit card hasnt been paid off in full then theres very little interest saving - since there is only upto 5X days interest free when previous balances have been cleared.. gets more complicated were there to have been any cash advances on the account or balance transfers etc with different rates being targeted first..

chattychappy

Assuming you are not in a position to pay off the whole balance and your existing balance is attracting interest at the standard purchase rate that will be applied to new transactions, then to minimise interest you should pay off £200 now. Interest is calculated daily - so the lower the balance, even if for just a few days, the lower the interest added will be.

Just a couple of things:
1) it is not unknown for CCs to reduce credit limits when people pay off a chunk. So you can never be sure that you will be permitted to put further spend through

2) Don't forget minimums/due by dates. Don't pay off the £200 just before a statement date only to have a statement generated requiring a further payment before you have the funds.

CLAPTON

Depends whether you are clearing the ststament balance each month.
But presuming not then :

Interest accrues on the daily balance (unless the statement balance is paid in full each month) so on average paying as much off as soon as possible and then spending will on average mean you have a lower average balance.
Make sure you pay at least trhe minimum between the statement date and the pay by date.