Should I clear bill to avoid interest?

darloscot

Hi, made a mistake and missed my payment date by one day. Payment was due on the 4th, and I paid today (5th). I always clear the bill in full. My next bill is due in a few days. I am wondering how to minimise the interest that I now get charged. If I bring the balance down to zero before the next bill is charged, will this reduce the interest I get charged? Or has the interest already been generated for the charges that will appear in next month's bill? Just wondering what I can do to minimise the interest, but don't want to clear this months payments unless it helps as the money sits and offsets my mortgage instead.

[Deleted User]

Interest is charged daily. So the more the pay and the seller you pay, the better.

bigadaj

Might be best to ring them up and see what they can do. If you have a good record and history they may waive any fees, reporting to your credit file and possibly interest.

No guarantee but if you don't try you don't get.

YorkshireBoy

You may likely find that your payment doesn't get credited until Monday/Tuesday, with today being a non-working day.

You'll also be facing a £12 late payment fee.

Interest will be charged on any balance existing on your account since your last statement date (10th Feb or thereabouts?).

In your shoes I'd send an additional payment now, equal to...

Spend since last statement + £12 + an amount equal to the likely interest to be charged on the next statement + another tenner or so, thereby giving you a very small positive balance at statement date.

Then, if you're feeling lucky, give them a call AFTER statement date and try and negotiate a goodwill gesture on the £12 fee and interest incurred. You're more likely to the get the former than the latter.

chattychappy

I wouldn't panic about the interest. By paying (presumably the full balance) a day late, you're already on the hook for interest in respect of those transactions - but by paying what you paid, you have at least stopped interest running any further on those purchases. I]I disagree with YB. The interest you will face will be backdated to the transaction dates, not just the statement date (unless you are already paying interest, which I'm guessing you're not.)[/I

The next statement (presumably in a few days) will show a late fee and the interest as well as subsequent purchases. If you pay that in full by return, you shouldn't get any interest on the subsequent purchases and you will stop interest on interest (and interest on the late fee) asap.

The following statement might show some very small trailing interest.

Agree with YB: give them a call, say you slipped up and ask them to refund the £12. To my mind these late fees are totally acceptable unless the banks really incurred a loss by receiving the money late (beyond the interest they charge). In the old days you'd get a letter or a phone call. At least they did something for the money! Anyway.... keep it friendly, but don't be shy to ask! Interest is a fair cop, though!

YorkshireBoy

chattychappy wrote: »

I]I disagree with YB. The interest you will face will be backdated to the transaction dates, not just the statement date (unless you are already paying interest, which I'm guessing you're not.)[/I

Thanks. Edited for clarity.

The next statement (presumably in a few days) will show a late fee and the interest as well as subsequent purchases. If you pay that in full by return, you shouldn't get any interest on the subsequent purchases and you will stop interest on interest (and interest on the late fee) asap.

I think OP will need to overpay as I suggested earlier, to stop the interest, as otherwise they won't have met the 2 consecutive statement rule. I could be wrong though?

Are card providers allowed to charge interest on default fees? I thought that practice had been stopped? Or maybe it's just that they can't charge compound interest?

The following statement might show some very small trailing interest.

Overpaying before this statement is produced should stop that?

chattychappy

YorkshireBoy wrote: »

I think OP will need to overpay as I suggested earlier, to stop the interest, as otherwise they won't have met the 2 consecutive statement rule. I could be wrong though?

I think it's an effect rather than a rule and this has become an MSE "rule of thumb". Most CCs say you must pay the statement balance in full to avoid purchase interest being applied. So an effect of this is that if you don't pay in full, you will usually get interest on at least two following statements (because of trailing interest). I've never seen it in the T+Cs that you must clear two statements to stop interest running, only an "advisory" type note that you have to clear two statements to stop seeing interest.

Not sure what card the OP has. But Barclaycard works that way: http://help.barclaycard.co.uk/resources/barclaycard-help/customer_services/Barclaycard_Core.pdf

In fact they are even more generous, because it seems they don't charge trailing interest:

If you pay your main balance plus any purchase plan instalments due for that month in full by your payment due date, the following will apply:
• We won’t charge interest on purchases or non-Sterling cash transactions (transactions made in a foreign currency) that have been added to your account since your last statement [NO INTEREST ON NEW PURCHASES]
• We will only charge interest on outstanding standard balance items (including purchases), purchases on promotional rates, and non-Sterling cash transactions included in your current statement balance up to the date of your current statement [NO TRAILING INTEREST]

YorkshireBoy wrote: »

Are card providers allowed to charge interest on default fees? I thought that practice had been stopped?

I don't know. Interest on £12 at a typical APR would be less than 25p a month anyway. I can't see any restrictions in the lending code. I thought there were some rules about other knock-on effects, particularly concerning overdraft charging, so they had to start giving notice of applying charges. Perhaps someone else knows.

YorkshireBoy wrote: »

Overpaying before this statement is produced should stop that?

Your overpayment suggestion should prevent trailing interest and indeed any interest on the £12 fee. But I think it's going to be so small as not to worry as the OP has stopped interest running on purchases which is the main event. I'm pretty sure interest won't run on new purchases provided he pays the next statement in full for the reasons above.

This does mirror my experience when I've been caught for interest.

planteria

i would pay them by FP from your current account, and then call them to apologise and tell them that you have done so. try to get them onside.

darloscot

Thanks all. Have made a further payment that completely clears all outstanding purchases since the last statement, the £12 fee and a bit more on top to make sure I will have a credit balance next month. When I normally make the payment next month I will just make the payment to my savings account to more or less restore my position. I will give them a call tomorrow and explain. Last time (about 3 or 4 years ago) They waive the late payment, but not the interest. The interest was about £80 and then a further £20 or so the following month. Hopefully I will have prevented any interest charges in future months, and if I can get the late payment fee at least then I will get something back. It is a Tesco credit card. Last time I stopped shopping there for a year out of principle, which will have cost the company a lot more than the £80 they made on the interest. Still a good credit card for points etc though.

PeacefulWaters

Still a good credit card for points etc though

In what way?

chuckley

the bigger issue is the 'missed payment' marker on your file.