Help with my first Credit Card. How does it work?

Surfeit75

I just got my first ever credit card. I have a bad credit file so had to settle for Capital One Classic

not allowed to post links but it is this card here
capitalone.co.uk/creditcards/classic-mastercard-credit-card.jsf

Only have a limit of £200 and don't really want to use it that much only to rebuild my credit and for emergencies but how does it work?

It says there is a monthly rate of 2.53% for purchases. If for example my "payment due date" was set for the 24th of every month and I purchased something for £50 on the 14th does this mean I have to pay back 2.53% of £50 (£1.26) for 10 days?

So £1.26 x 10 = (£12.60)

Means on my statement the balance owed would be £62.60?

Or have I got this wrong? is it a whole month (30 days) interest you pay regardless when the transactions took place?

I keep reading about how it is interest-free if you pay back the full amount each month but I don't think this applies to the card I have does it?

Any advice?

grumbler

You pay interest on purchases only if you don't pay the statement balance in full.
Don't withdraw cash and do pay the balance in full and on time - and you won't be charged any interest. The best way is to set a DD for full payment.

If you don't pay the balance in full, the interest will be added on all purchases and calculated on daily basis.

Surfeit75

grumbler wrote: »

You pay interest on purchases only if you don't pay the statement balance in full.
Don't withdraw cash and do pay the balance in full and on time - and you won't be charged any interest. The best way is to set a DD for full payment.

Thanks for your post very helpful :beer:
If I had this card for several months and never paid a penny in interest is it likely they would cancel my account as I wonder what their motivation would be to have me as a customer if they were not making any money from me?

And if I were to withdraw cash would I pay daily interest (2.53%) on the amount withdrawn until I get the next statement?

forgotmyname

You will have a statement date and a pay by date.

Just say the statement date is the 1st and the pay by date is the 20th.

Everything you spend after the 1st goes into next months bill. Whether you spend it on the 2nd or the 29th.

If you fail to pay the whole balance in the pay by date you get charged interest on the full amount of that statement. (unless thats changed)
So spend £200 and only pay £199 you pay the interest on £200. Not the £1 balance.


Ideally you dont want to run over and pay any interest.

Never withdraw cash from a cashpoint. Interest maybe charged from the day you withdraw it and a cash withdraw fee also.

Dont get into the trap of thinking i will clear it next month. There is always something else that needs to be done before you clear it.

Been there done that and never again. I will never owe anything on a card again.

Balances are paid in full or i wont use it.

Withdraw cash wont look good. May make you look desperate for money.

w211

Surfeit75 wrote: »

If I had this card for several months and never paid a penny in interest is it likely they would cancel my account as I wonder what their motivation would be to have me as a customer if they were not making any money from me?

No, they're still making money from you from the merchant fees they charge wherever you use the card (eg the shop you bought your goods from have to pay the credit card company an amount whenever you use your card)

After a while, if they see your'e doing this, they may even up your credit limit to encourage you to spend and leave a balance on the card so you pay interest.

I've had credit cards for years where I've always paid off the balance in full and never incurred interest.

American Express issues cards which are known as "charge cards" where you have to pay off the balance in full every month. They make their money from the merchant fees I just mentioned (and these are higher than Visa/Mastercard's), and the annual fee they impose on their cards.

grumbler

Surfeit75 wrote: »

TIf I had this card for several months and never paid a penny in interest is it likely they would cancel my account

No

as I wonder what their motivation would be to have me as a customer if they were not making any money from me?

They charge merchants for all your payments.

And if I were to withdraw cash would I pay daily interest (2.53%) on the amount withdrawn until I get the next statement?

Yes - until you pay it off.

Surfeit75

Thanks guys I just want to make sure I have got everything crystal clear and that I don't get any unexpected surprises etc.

I think I prefer to make manual payment as I frequently move my money around different bank accounts and if a direct debit failed that would be me !!!!!!ed so probably best for me to do manual. I already have their bank details set up as a payee on my online banking so it can be done through the click of a button.

And to confirm any purchase I make whether that be online or in physical shops I won't have to pay any interest, IF I pay the balance in full?

I only ask because when searching around I see a few forums/threads where people have used their Credit Card for Ladbrokes or other bookies and this is apparently treated as a cash advance? Is this only for gambling sort of stuff and bingo etc, general purchases should be fine?

grumbler

Gambling transactions are usually treated like cash by all CCs.

Aqua's definition of 'cash advance' is "cash, traveler's cheques or foreign currency obtained by using the card or finance payments or gambling transactions".

Certainly, bingo is gambling.

Also, you pay extra 3% (min £3) on all cash transactions, not just the interest.

Surfeit75

And Water Rates / Rent etc is classed as purchase too? Anything paid for on the card except for 'gambling' stuff?

Would I be punished if I accidentally went in credit on the card? By that I mean my limit is £200 but say I made an error and paid too much back and was +£10 at £210 would anything happen?

grumbler

Everything except 'cash advances' defined above. However, very few utilities companies (if any) accept CC payments. So do councils (council tax). Don't know about rent. Travel agents and airlines like charging extra for CC payments.

No, you won't be punished, but it's better not to do this. And it's possible only if you make extra payments, not if you just pay your statement balances in full.

forgotmyname

You should setup a direct debit for the minimum payment just in case you forget.

If a direct debit failed you would be in ??? What do you think a missed payment on your credit card will do?