Have I Understood Credit Cards Wrong?

anotheruser

This is how I understand credit cards work:

Spend £100 in January.
Get a bill in February.
Paid via DD in March.

No interest.

However what happens if this happens:

Spend £100 in January.
Get a bill for £100 in February.
Spend £50 in February after bill is produced.
Paid original £100 via DD in March.

Would I get charged interest on the £50?

YorkshireBoy

No..........

roonaldo

credit cards are revolving credit, so £50 spent in feb would be on march statement and if thats paid in full at due date then no interest.

anotheruser

Okay, thanks.

On my statement it says "estimated interest £5.00" but then I have a DD that pays in full when requested so technically I shouldn't ever get interest charges.

Linda32

anotheruser wrote: »

Okay, thanks.

On my statement it says "estimated interest £5.00" but then I have a DD that pays in full when requested so technically I shouldn't ever get interest charges.

Yes, mine says that as well. Although I pay like you do. I suspect its just because they have to be clear and up front now on charges. Just in case the DD doesn't happen for whatever reason.

YorkshireBoy

anotheruser wrote: »

On my statement it says "estimated interest £5.00" but then I have a DD that pays in full when requested so technically I shouldn't ever get interest charges.

If you turn the statement over, they give a breakdown of how they've arrived at this figure.


Basically, that's the interest that will be charged on your next statement if...


1. You make the minimum payment on your payment due date, and


2. You make no further transactions.

datlex

In simple terms any spending is interest free up to the point your credit card statement balance is due.

You'll notice there is a gap between the statement date and the payment due date. To be interest free payments have to be made in time to meet the payment due date. If you are paying DD for the full balance the card company should claim the correct amount in time to meet your statement balance.

Remember there is a difference between your statement balance and your card balance. Your statement balance tells you what they want you to pay in that financial period, your card balance shows outstanding spend which will need paying for - this can include new purchases plus any statement balance not yet paid for.

So for example in Jan I might spend £100, get a bill at start of Feb which would be due mid Feb. My statement balance would be £100. If I then spent £50 at start Feb after I had bill, my card balance would show £150 but I would only need to pay the statement balance by due date. The extra £50 wouldn't become due until the next statement date.

If you are paying by DD then I think you have the option to get them to take the full statement balance. If this is set up, you won't incur interest (except if you have spends such as cash withdrawals which seem to incur interest from day 1).

I personally don't like DDs to pay credit cards, for the simple reason they limit you. For example they don't allow you to be flexible on when you pay. They also don't allow you to spend freely over the month more than the original credit limit. They also don't allow you to maintain a low balance, whilst taking advantage of the card fully,

thenudeone

datlex wrote: »

In simple terms any spending is interest free up to the point your credit card statement balance is due.

I know you clarified it later in your post, but this statement on its own isn't true.

Any spending is ONLY interest free if the FULL STATEMENT BALANCE is paid in full by the due date. If you pay just 1p less, then you will be charged interest on every transaction from the date of the transaction until you pay it off. Once that happens, purchases won't be interest free until you pay off two statements in a row IN FULL.

jfdi

But you do need to watch the dates!

I spent $200 (on a clear card) on Dec 3rd, bad timing coz the bill came through on Dec 10th to be paid by Dec 20th!

I only used the card for 'safety' purposes & would clear it anyway, but you don't always get 56 days!

PS - How do I get my pound sign back? It's changed to #. Ta!

thenudeone

jfdi wrote: »

PS - How do I get my pound sign back? It's changed to #. Ta!

On W7, click the keyboard on the taskbar and change to "UK Extended"

datlex

thenudeone wrote: »

I know you clarified it later in your post, but this statement on its own isn't true.

Any spending is ONLY interest free if the FULL STATEMENT BALANCE is paid in full by the due date. If you pay just 1p less, then you will be charged interest on every transaction from the date of the transaction until you pay it off. Once that happens, purchases won't be interest free until you pay off two statements in a row IN FULL.

My statement was true it is free up to the due date, after you get charged.