Credit card interest charge, have they made an error or is it my misunderstanding?

joeyboy

I've sent them an email for clarification, but I'm pretty confused about the interest charged for this month. Here's all the relevant sums and dates....

Statement for 10th July: Payment of £100 off balance on June 13th, no interest charged, nothing is now owed on the card.

Statement for August 12th: 28th July, paid for holiday on card, £320 now owed. Payment is due for this statement on September 6th, minimum is £6.06, if I only pay that I'd incur £10.18 interest on the remaining balance.

August 23rd: I pay £300 off the outstanding balance, so now I only owe £20.

This is the confusing bit...

Statement for September 11th: Interest on your standard balance (2.207%), £5.86.

So what I don't get is, why am I getting charged £5.86 interest here? I assumed I'd only get interest on what is left outstanding after September 6th, which would be £20?

I'm very new to the whole credit card thing, I only got it for protection when buying bigger ticket items, especially holiday stuff, and help get some history for a stronger credit rating in the future (mortgages and shiz).

gotmurked

If you don't pay the balance in full (ie the £320) then interest is charged on the full £320, not just the £20 remaining.

joeyboy

gotmurked wrote: »

If you don't pay the balance in full (ie the £320) then interest is charged on the full £320, not just the £20 remaining.

Aah I see, I didn't realise that's how it worked haha. I assumed it adjusted and was based on what you currently owed.

Lesson learnt for next time, pay it all off every time. :rotfl:

grumbler

joeyboy wrote: »

... I assumed I'd only get interest on what is left outstanding after September 6th, which would be £20?

Stop making assumptions.
If you don't pay the balance in full the interest gets charged on £320 until the 23rd, then on £20 after the 23rd.

The interest on purchases gets waived only if the balance is paid in full.

joeyboy

grumbler wrote: »

Stop making assumptions.
If you don't pay the balance in full the interest gets charged on £320 until the 23rd, then on £20 after the 23rd.

The interest on purchases gets waived only if the balance is paid in full.

So if I left it and paid it in full on the 6th September, I'd incur no interest for the next statement? But if any amount, even £1, carries over past the 6th, you pay interest on everything you owed from the previously months statement, ignoring anything you pay off during it?

MPH80

Exactly.

Well - almost - depending on the credit card it could be a daily interest accumulation which means if you're not planning on paying it all off - the earlier you do pay the better.

grumbler

Beware that you've lost the interest-free period on your next billing month purchases as well: Santander Interest Calcualtion

joeyboy

MPH80 wrote: »

Exactly.

Well - almost - depending on the credit card it could be a daily interest accumulation which means if you're not planning on paying it all off - the earlier you do pay the better.

So that's as Grumblers example shows? As in they suggest I am charged daily interest on £320 until the 23rd, where it's £20? Which probably makes sense, as if I had been charged 2.207% on £320 I'd owe over £6 in interest, so since I owe less, it probably was some daily thing. So if I'm planning to leave any unpaid..which me thinks I won't now haha, I should probably pay it the same day I get my statement.

iammumtoone

I made exactly the same mistake OP on my first card. I had the money to pay for the item but had a 0% card so used that to pay. When it came to 0% ending I went into the bank to pay (this was before internet banking :eek:). I realised my mistake when I got home, I had not paid enough but was only about £20 short on a balance of over £1000. I didn't think it was worth the effort travelling back into town as the interest on only £20 wouldn't be much - wrong like you I learnt the interest went on the lot :eek:

joeyboy

grumbler wrote: »

Beware that you've lost the interest-free period on your next billing month purchases as well: Santander Interest Calcualtion

Ah I see thanks for the heads up. So if I make any purchases now, I would need to pay on the day I get my October statement to avoid any interest? Or would I need to pay the balance of manually even before the statement?

zagfles

It can be cheaper to get a cash advance on the credit card if you can't afford to pay the full amount, but check the charges carefully!