Help needed about minimum payment.

Creditfool

Hello

I was hoping someone could help me as I have confused myself.

I've had a credit card for quite some time and I've been paying off as much as I can when I can. Recently I've had my hours cut so I've been having to pay the dreaded minimum payment.

I had a thought recently as to how I can pay it off quicker.
But I'm not sure if it would work.

So say my minimum payment is £100 a month. Which I pay. And I don't use the credit card of any purchases. So I end up just paying the minimum payment which doesn't pay much off after interest.

Instead, If I were to buy £100 of petrol with my credit card instead of cash, and then come straight home and pay the £100 pounds off the credit card the same day. And then pay my normal £100 for the minimum payment would I then infact be better off and have paid an extra £100 pounds to the credit card? As the payment for the petrol would have covered my minimum payment and not incurred interest?

I've definitely confused myself. Hopefully someone can make sense of it.

Thanks.

dan321

You wouldn't be paying off the credit card any quicker. I can't really see any benefits in doing this unless you put £90 petrol but paid off £100

Herbalus

Where does the cash come from? If it comes from your credit card be advised that this usually has charges attached and isn't recommended. It certainly wouldn't help you clear your balance earlier.

There is no difference in what you are saying. You have paid an extra £100 to your card but you have also spent £100 on it, so you gain nothing.

Rather, what would help you clear the balance more quickly is to set up a standing order of £100 (in your example), as then you will be paying this every month while your minimum payment is decreasing - this will ensure that you pay more off each month.

Creditfool

I do have a standing order. I've definitely confused myself and not written it down clear enough. Lol

What I mean is instead of paying cash for the petrol, would it not be best use the credit card to pay for it. And then make a payment to the credit card with the cash I was going to pay the petrol with. Would this then not be classed as my minimum payment on my statement?

So then I can still pay my standing order as normal. So it actually pays off £100 and not the minimum payment. As the petrol transaction has covered the months minimum payment?

If not then please just say I'm over thinking this and it's not the case. Lol

RobTang

Generally it wont make any difference, unless you have items currently that are at a higher rate of interest than your normal purchase rate.

You might even get charged that day's interest on that £100 depending on how your bank calculates interest.

You always have to cover the current months interest there's no way around it.

oldestgnome

If you make a purchase of petrol for £100. You add £100 onto your card in purchases.

If you then paid £100 minimum payment and £100 cash you would reduce the balance by £100 so would be no better off than just paying the £100 by standing order and making no purchases.

To reduce the balance you need to make no purchases and pay off more than the £100.

HTH!

Creditfool

Ahhh I see. I was going under the impression that I wouldnt get charged interest for the purchase as I don't get charged daily interest. Therefore not incurring any interest for the petrol. But it doesn't work like that?

It made sense in my mind. But it obviously won't work lol.

Thanks for your help. Slightly less confused one of those day!

SnowTiger

Creditfool wrote: »

Hello

I was hoping someone could help me as I have confused myself.

I've had a credit card for quite some time and I've been paying off as much as I can when I can. Recently I've had my hours cut so I've been having to pay the dreaded minimum payment.

I had a thought recently as to how I can pay it off quicker.
But I'm not sure if it would work.

So say my minimum payment is £100 a month. Which I pay. And I don't use the credit card of any purchases. So I end up just paying the minimum payment which doesn't pay much off after interest.

Instead, If I were to buy £100 of petrol with my credit card instead of cash, and then come straight home and pay the £100 pounds off the credit card the same day. And then pay my normal £100 for the minimum payment would I then infact be better off and have paid an extra £100 pounds to the credit card? As the payment for the petrol would have covered my minimum payment and not incurred interest?

I've definitely confused myself. Hopefully someone can make sense of it.

Thanks.

The problem with this plan is that if you don't pay your credit card off in full every month you pay interest on purchases from the day they're made

So, let's say the balance on your card is £2,000. If you added £100 for petrol, then paid off £100, the balance on your card that day would still be £2,000.

You only get the 'up to 56 days interest free credit' on new purchases if you pay off the balance in full the previous month.

Having said that, it's a good idea to throw as much cash as you can at your credit card balance. So, if you paid off £100 a few days before you topped up with petrol you'd save a small amount of interest.