Silly question about interest

cherryblossomzel

Sorry about this one, but it's something I've not had to deal with before so I just want to check:


I got a 0% balance transfer to my Lloyds credit card last year. Since then I've been paying off only the minimum by dd, as I earn interest on the balance in my current account, so I prefer to have the cash there. The 0% off is about to expire, so I want to clear it. Obviously I'd still prefer to keep the cash in my current account as long as possible. So my question is:


I will get a new statement next week, which I think will say something like: balance £xxx, payment due on 19th May, projected interest £yy. If I change my dd to pay off the balance in full on say the 1st of May, does that then mean I won't pay the £yy interest at all?


Is the interest only added if I don't clear the £xxx balance by 19 May?

YorkshireBoy

I wouldn't mess about with the DD. Simply make the payment by other means (FP, over the branch counter, etc).


Reason being that the DD change may not be in place before your next statement is produced...and it needs to be.

cherryblossomzel

YorkshireBoy wrote: »

I wouldn't mess about with the DD. Simply make the payment by other means (FP, over the branch counter, etc).


Reason being that the DD change may not be in place before your next statement is produced...and it needs to be.

OK, but then when do I make the payment so as not to pay the interest? The day before it's due? Or as soon as I get the statement?

bsms1147

Any time between the statement date and the due date, but allowing a few days for the funds to reach their account, so really any time between the statement date and a few days before the due date.

The extra days in your current account are pennies, or a couple of pounds at most.

One thing you need to watch out for is that any additional payments you make may alter the direct debit.

For example, horror story;
Your balance is £1000
Your minimum payment, which will be taken by direct debit, is £25.
Therefore to clear the balance, you pay £975 to the card, allowing the final £25 to be paid by the minimum-payment direct debit that is in place.
Some cards however will see your additional payment, and the way they treat this means that as you have paid the minimum payment, the direct debit does not need to be taken.
In this scenario you therefore do not pay off the total balance, leaving £25. When you are out of your 0% period, interest is charged on the full balance up until the time you pay it off, and so is charged on the full £1000. Trailing interest means it may take you a couple of months to then pay off this balance.

~

So be certain what effect the extra payment will have on the direct debit (reduces/stops it entirely, or the direct debit is taken regardless of extra payments) and account for this, or pay the entire balance off with a direct payment and then reclaim any overpayment after the fact.

cherryblossomzel

bsms1147 wrote: »

So be certain what effect the extra payment will have on the direct debit (reduces/stops it entirely, or the direct debit is taken regardless of extra payments) and account for this, or pay the entire balance off with a direct payment and then reclaim any overpayment after the fact.

Thanks, I'm pretty certain the bank would take my manual payment as the only payment, so I'll just cover the whole balance and claim back any overpayment if there is any.

YorkshireBoy

cherryblossomzel wrote: »

OK, but then when do I make the payment so as not to pay the interest? The day before it's due? Or as soon as I get the statement?

Your 0% intro period may not end on your statement date. Nor may it end on the payment due date. In fact, its highly unlikely to end on either...more likely it'll be a specific date, x months from account opening. This date will either have been given to you when you opened the account or, more likely, will have been put on your previous statement (giving a couple of months notice).


You should obviously aim to have paid the entire balance by this date.

cherryblossomzel

I can't find the paperwork that came with the balance transfer and when I tried to get an exact date from the branch, they couldn't tell me. I'll try and call the credit card people directly. If they can't help me I'll just pay it ASAP. Better to miss out on a bit of earned interest in my current account than pay cc interest.

msallen

I always play it safe by paying off a couple of weeks early. The minimal amount I could be earning in interest is peanuts compared to what I could end up paying if there are any issues with it being settled on time.