Credit card interest calculations

SouthUKMan

Do credit card companies charge / accrue interest on a daily or monthly basis? In other words, will I save money on interest if I can make 3 or 4 smaller payments throughout the month (money generated from Ebay sales) or will I still be charged the same interest (in terms of pounds and pence) if I payback the same amount of money in a lump sum once a month? Sorry, I'm not very good at explaining...to put it yet another way, will I save money by chipping away at the credit card total every time I get a bit of spare cash (even if it is £10 or £20 once a week)?

glentoran99

The calculate Daily

CLAPTON

SouthUKMan wrote: »

Do credit card companies charge / accrue interest on a daily or monthly basis? In other words, will I save money on interest if I can make 3 or 4 smaller payments throughout the month (money generated from Ebay sales) or will I still be charged the same interest (in terms of pounds and pence) if I payback the same amount of money in a lump sum once a month? Sorry, I'm not very good at explaining...to put it yet another way, will I save money by chipping away at the credit card total every time I get a bit of spare cash (even if it is £10 or £20 once a week)?

as above : daily is the answer but for modest sums it make little difference

suppose you pay £20 early by say 10 days and your APR is 25%

then the saving will be
£10 x .25 *10/365 = 6 pence but over a period of time it will make a contribution

grumbler

SouthUKMan wrote: »

Do credit card companies charge / accrue interest on a daily or monthly basis? In other words, will I save money on interest if I can make 3 or 4 smaller payments throughout the month (money generated from Ebay sales) or will I still be charged the same interest (in terms of pounds and pence) if I payback the same amount of money in a lump sum once a month? Sorry, I'm not very good at explaining...to put it yet another way, will I save money by chipping away at the credit card total every time I get a bit of spare cash (even if it is £10 or £20 once a week)?

You will save if you carry the balance on the CC, i.e. don't pay the statement balance in full every month.

chattychappy

grumbler wrote: »

You will save if you carry the balance on the CC, i.e. don't pay the statement balance in full every month.

Yes. If you pay your statement in full each month, you won't pay interest (except on cash/gambling transactions).

If you pay even 1p short of the full balance, then interest will be calculated from the date of each transaction to when payment is applied. (**)

So if you know you can't pay off the balance in full, then pay as much as you can as soon as you can. Remember, if you have a DD, the payment will be taken just before the due date - which will mean you are needlessly paying interest if you could have made a manual payment earlier. If you do make manual payments whilst a DD is setup, do be sure to understand how they interract.

(** this can seem rather harsh. If you are just a little short of being able to make the full payment, it can actually be worth to get a cash advance for the difference, pay this into your bank account, and then make full payment. This is because the fees/interest on a small cash advance can be less than the interest you would be charged by losing the "up to 56 days interest free on purchases if you pay your bill in full")