Should I pay off the entire balance or statement balance?

gregdedman

Hi everyone,

I'm not 100% sure if I paid my credit card right this month to avoid any interest.

So, I just paid February's statement amount off in full (only £25) but my balance is actually £250 because I purchased flights after my last statement was issued. As long as I pay off the remaining balance before March's statement date I should avoid any interest right?

I got confused reading everywhere that you must pay your balance off IN FULL which made me think, even thought the latest statement amount was £25 I should really pay off my balance in full of £250.

Sorry, I'm having a thick day!

grumbler

It's the statement balance that has to be paid in full.

chattychappy

gregdedman wrote: »

So, I just paid February's statement amount off in full (only £25) but my balance is actually £250 because I purchased flights after my last statement was issued. As long as I pay off the remaining balance before March's statement date I should avoid any interest right?

No you don't need to do that. You paid the February balance by the "due by" date (presumably), so no interest on the March statement. The March statement will show the £250 - you need to pay this off by the "due by" date shown on that statement.

Remember: each statement has a "due by" date. Here are the "what ifs"

1) Pay LESS than the MINIMUM by the "due by" date. You have broken the T+Cs. You will get interest on the next statement as well as a late payment free. You might lose any promo deal you have - eg a 0% BT deal. You will likely get reported to a CRA for making a late payment. Your use of the CC might be restricted. For a "first offence" a CC might refund the late payment fees and exceptionally reinstate a promo offer.

2) You pay EXACTLY the MINIMUM. You will get interest on the next statement. You might have a flag placed on your CRA report for that month saying you only paid the minimum. This is slightly negative - if you always only pay minimums, it could be a sign of distress.

3) You pay MORE than the MINIMUM, but LESS than the STATEMENT BALANCE. You will get interest on the next statement. Even if you pay less than the full balance by only 1p, you will still get interest on all transactions from transaction date to when they are paid off.

4) You pay the STATEMENT BALANCE. You won't be charged purchase interest on the next statement. Cash and cash-like transactions almost always have interest applied anyway.

5) You pay MORE than the STATEMENT BALANCE and up to the CURRENT BALANCE at the time of the transaction. As for 4). Sometimes it's worth doing this to stop interest running on recent cash transactions or to free up credit for further spend if you are close to the limit.

6) You pay MORE than the CURRENT BALANCE. You won't be charged interest on the next statement, but you are breaking the T+Cs by putting the account into credit. For small amounts this isn't usually a problem. For larger amounts you might have the card blocked or the CC might attempt to return the payment.

Enjoy your flights!

datlex

If you want to make sure you have the funds to cover the £250 you paid on the card, then I would pay it along with the £25. You could make two separate payments if you prefer so you can see you have paid both. Not knowing how you personally manage your money, it may be preferable to do this to avoid the risk of spending the money.

Ilona

I have recently used my Tesco credit card for part payment towards a car. Even though I have the cash I put £2,000 on it to get the points. It didn't come up on the last statement so I just paid the £100 odd for something else, which was on there. The two grand will come on the next statement which I will pay in full.

You don't need to pay it before they ask for it, which is the whole point of a credit card, to give you extra time. I don't need extra time because I have the cash. Make sure you don't spend the money you have earmarked for your next statement.

All you need to do is clear the statement every month to avoid paying interest.
Ilona

nicholaswitchell

Statement balance.

grumbler

Ilona wrote: »

...which is the whole point of a credit card, to give you extra time. ...

Well, not all CCs give you 'extra time' for free - and the OP's question was about avoiding paying any interest.

I couldn't recollect what CC it was that didn't give an interest-free days even on purchases, but YB reminded me today:
http://www.tsb.co.uk/credit-cards/purchases/advance-credit-card/

Interest charged from the date of the transaction.