Help understanding interest

bubble56

Hey,

I made a transfer to bank of £2000 from my credit card which is interest free until dec 2016 and continued using my card for some expenses and have paid expenses off in full every month plus a little bit extra to wear down the £2000 slowly.

But for the last few months I have been charged interest and I'm not sure why, I thought that as long as I paid off at least the amount of the expenses every month the 2000 could remain interest free.

Are my payments going towards the £2000 transfer to bank rather than the monthly expenses?

Gaz83

Did the card provider allow interest-free cash advances? Very unusual if so.

PeacefulWaters

Because you're not clearing the balance in full every month interest is payable on your expenses (purchases) from the date of the transaction.

There's no interest free period on purchases unless the whole statemented balance is cleared.

Get another card for purchases and stop mixing balance transfers and purchases on the same card.

bubble56

It wasnt a balance transfer to another card it was a transfer to my current account. It is 0% until December 2016, there was just a one-off fee.

I thought I read somewhere that when you made payments the deductions were made from the part with the highest interest so I assumed as long as I pad back the purchases every month the transfer to my bank would remain at 0%.

[Deleted User]

The transfer does remain at 0%. The interest is being charged on the purchases as you're not clearing the entire balance each month.

As PW said, basically.

bubble56

Ok, so if I don't make any purchases this month, I won't be charged any interest? Or will I be charged interest for the purchases made in previous months now too until the whole balance is cleared?

grumbler

All the payments you made went towards the purchases and the interest in the first place.
Even if the balance is now the same as the original 'transferred' one, there still can be some small trailing interest.

MSE: Balance Transfer Credit Cards

The six golden rules

• ...
• ...
• 3. Never spend or withdraw cash on these cards
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bubble56

Thanks all for your help.

It will all be paid off in a couple of paydays anyway so nothing to worry about but it's good to know not to spend on it if I ever do it again.

bearcat16

The only card to my knowledge that allows you to do this without paying interest is the Nationwide Select credit card. There may be others, but that's the only one I know of.

It's better to have a seperate 0% card and a spending card, not mix them together.