Estimated Interest £20. Minimum payment £7?

forgotmyname

Since having finance issues a long time ago i pay everything off and not a penny more. Paying for insurance etc in one go if it saves money etc.

But there is no way i will let my CC bill run over and pay interest, so i rarely give the bill a 2nd glance. Amount = £££ so i pay £££ and thats it.

I had a closer look this month and the estimated interest is £20, but the minimum payment is only £7 ?

Shouldnt the minimum payment be in excess of the estimated interest?

Last months bill was £400 ish, showing as paid in full and this months bill is £700 ish, due in 2 weeks.

Why the low minimum payment?

HappyMJ

forgotmyname wrote: »

Since having finance issues a long time ago i pay everything off and not a penny more. Paying for insurance etc in one go if it saves money etc.

But there is no way i will let my CC bill run over and pay interest, so i rarely give the bill a 2nd glance. Amount = £££ so i pay £££ and thats it.

I had a closer look this month and the estimated interest is £20, but the minimum payment is only £7 ?

Shouldnt the minimum payment be in excess of the estimated interest?

Last months bill was £400 ish, showing as paid in full and this months bill is £700 ish, due in 2 weeks.

Why the low minimum payment?

The minimum payment is 1% of the outstanding balance plus and interest and fees charged to the account.

Interest would only be charged if you didn't pay the full payment.

If you just paid £7 then next month you would owe £700 minus £7 plus £20. You would owe £713 and your minimum payment would be £7.13 plus £20 making £27.13.

bengalknights

As happymj states the minimum payment is usually 1% of the balance outstanding

chattychappy

forgotmyname wrote: »

I had a closer look this month and the estimated interest is £20, but the minimum payment is only £7 ?

Shouldnt the minimum payment be in excess of the estimated interest?

The regs are that the balance should reduce over time in the event the cardholder makes no further spend and pays minimums only. So normally the minimum will exceed the interest charge.

In this case, "estimated interest" is what is expected to be applied to the next statement if you pay the minimum on this statement.

Sometimes the "estimated interest" can be more than a month's worth. This happens if you generally pay your statement in full (as I think you do). When the statement is generated, you don't see any interest. If you pay less than the full balance, then on the next statement the interest will run back to the dates of transanctions. Ie instead of getting your "up to 56 days interest", the "backlog" of up to 56 days interest can be applied in one hit.

forgotmyname

Sorry i forgot i posted this.

Yeah i had money issues some years back and a drop in income so a hard and fast lesson.

Now everything is paid in full and nothing on DD unless it saves money. If it saves £5 by paying in full then i will pay in full.

I just thought that the minimum shoud be x% + the interest and wondered why mine was only £7 when the interest would be £20.

Interest rate doesnt seem that good, have they increased it and i have not noticed? All those change letters they send me and i ignore? :X
Although they keep increasing my credit limit. Given the other half strict instructions that the first time we cannot pay it in full then it gets cut up...

I pay it off in full each month so the interest rate doesnt bother me though, its not like its a 50% + like some cards out there.

Thanks for explaining it for me. Makes sense now.

PeacefulWaters

The minimum payment is based on no interest on the issued statement.

Next month the minimum payment would be c£27 if you just paid the £7 now and allowed the interest to accrue.

forgotmyname

Yep, thanks i understand now.

No interest added onto the minimum because its paid off in full. As you say if i didnt pay it in full this time then the £20 interest will be added to the £7 minimum.

I didnt think of it that way. But i plan on staying out of that in future. Once bitten etc..

Thanks.

Anthorn

The minimum payment covers the interest already added to your account but not the estimated interest for the upcoming month.