credit card interest charges

shanee

This is a question regarding interest payments on my latest credit card bill. I hope the following makes sense:-
The balance of my account last month was £3,199.67. I usually pay off each month in full, but couldn't do so this time. But I did pay £3,043.37 into the account (which covered the payment of a specific item) on time. Leaving a balance of £156.30. I knew that the following month I would only have debits of £10. I presumed that because I had made such a substantial payment the interest I would pay would be very low.
I was astonished to find on the credit card statement I have just received from HSBC that I have been billed £83.24 interest. Despite the payment I made. When I spoke to them they said it was because I did not pay the amount in full.
I simply do not understand this.
Are they right?
Can anyone explain this to me?

nidO

They are right and this is basically how all credit cards work, but it's something that seems to be often overlooked/not fully understood particularly by people who normally pay their balance in full.

When you make any purchase, it starts accruing interest from the day you spend the money, until the day you pay your card provider back.
If, and only if, you pay your balance in full, they waive this interest so the amount you pay is zero.
If you don't pay the balance in full however, you pay interest on the full balance from the day you spent the money until the day you paid it back. So in your case you've been charged interest on £3199.67 from the date(s) you actually spent all that money until the date you paid the majority of it back.

zagfles

You'd have been much better off if you'd have got a cash advance for £160 on the same credit card and used that to pay off your statement in full! Then you'd only have paid interest on the cash advance, plus maybe a cash advance fee, but would likely have been less than £5 rather than £83.

Something to bear in mind next time if you're a bit short of being able to pay the whole balance off.

King_Of_Fools

Alternatively, depending on you current account, you may have been better off going overdrawn by £160 for a few days.

thenudeone

You have been charged correctly, and just about all credit cards work the same way.

Purchases are only interest free if you pay THE WHOLE STATEMENT BALANCE in full and on time. You didn't, so you have been charged interest on all purchases from the date of the transaction.

The balance remaining, plus any new purchases, will also be incurring interest charges even if you pay the next statement in full. Interest will stop once you have paid two consecutive statements in full.

If you aren't sure you can pay off all your spending, it would be best to split it across more than one card, so at least some of it can be paid off in full every month.

Once it it was all on one card, you would probably have been better off borrowing the extra c. £160 you needed, either by an overdraft or a cash advance on a credit card (even the same one).