Estimated Interest

DoctorStrange

Hi.

I put a large purchase through my credit card and let the balance stay on it over the statement end period. I usually clear it beforehand to ensure the statement balance is always zero, but didn't this time. It's cleared now, though.

I think most (all?) credit cards have a 56 day interest free period, but my statement shows a large "estimated interest" figure to be applied to the next statement.

Can anyone explain to me how this is calculated? Is it presuming I won't clear the balance and so nothing will now actuary be charged now the balance has been paid? Or am I wrong about the interest free period on purchases?

Many thanks

[Deleted User]

You'll have some trailing interest to pay, but once you clear two statements in full! Interest will stop.

The calculation reflects the actual interest that you will be charged, and an assumption that you will only pay minimum next time.

Vortigern

DoctorStrange wrote: »

I think most (all?) credit cards have a 56 day interest free period, but my statement shows a large "estimated interest" figure to be applied to the next statement.

You get 56 days interest free if you pay the statement balance in full. You didn't pay in full so you're paying interest on the whole amount from the date of purchase until paid in full.

Pay off the balance as soon as possible to reduce the trailing interest. Don't wait till the payment due date.

foxy-stoat

DoctorStrange wrote: »

Can anyone explain to me how this is calculated? Is it presuming I won't clear the balance and so nothing will now actuary be charged now the balance has been paid? Or am I wrong about the interest free period on purchases?

Many thanks

Look on a previous statement, it will tell you the interest for purchases. You can work out the interest by multiplying the balance by interest rate divide by 365 and multiply by the number of days in the month. Very roughly.

DoctorStrange

Just to clarify, I've never paid any interest on this card. I used to always pay the balance in full before the statement date, but then I was told that in doing so I wasn't earning any "positive history" as it looks like I've never had any credit...

So I started leaving a balance over the statement date then paying it off soon after, on the understanding that I had 56 days from the purchase date before interest would be charged.

If I've got to always clear the balance before the statement date, how can I show I'm using credit and paying it off, and how can you ever have 56 days interest free if you can't go past the statement date?

[Deleted User]

You pay it by the due date - not the statement date.

You'll get 56 days interest free if you make a transaction the day your statement is produced, as it won't then be payable until the due date of the next statement. That's why it says UP TO 56 days.

You don't get 56 days interest free on every purchase.

Marcio45

If your previous statement was zero and then you made purchases, now that the new statement is out showing your purchases... if you pay the full amount before due date (not statement date) then you should pay no interest at all. Thats where you get the UP TO 56 days interest free.
But only if your previous statement was zero or paid in full, and you again pay in full after issue of the new statement.
Hope that makes sense

Alexd52

And just to re-iterate, unless you are on a 0% promotional offer, the estimated interest for next month always assumes that you will only pay the minimum due. If you clear the statemented balance in full, you will actually pay no interest.

phillw

Alexd52 wrote: »

And just to re-iterate, unless you are on a 0% promotional offer, the estimated interest for next month always assumes that you will only pay the minimum due. If you clear the statemented balance in full, you will actually pay no interest.

I only remember seeing estimated interest when I'd not cleared the balance the previous month.

It happens when your 0% deal ends if you try to get the full 0% term as your spending in the last month will attract interest because at the beginning of the month you had all that stoozed spending on there. But in that circumstance the estimate is correct, they will charge you that interest even if you pay that statement in full.

It's estimated because if you clear the balance in full before the next statement then they'll stop charging you interest.

Ben8282

DoctorStrange wrote: »

Hi.

I put a large purchase through my credit card and let the balance stay on it over the statement end period. I usually clear it beforehand to ensure the statement balance is always zero, but didn't this time. It's cleared now, though.
Why do you always repay the balance prior to the statement date to ensure that your statement balance is always zero. This is a very unusual way to conduct a credit card account.

I think most (all?) credit cards have a 56 day interest free period, but my statement shows a large "estimated interest" figure to be applied to the next statement.

Can anyone explain to me how this is calculated? Is it presuming I won't clear the balance and so nothing will now actuary be charged now the balance has been paid? Or am I wrong about the interest free period on purchases?


The estimated interest is the amount of interest you will pay the following month assuming no further transactions and that you make only the minimum payment. Assuming that you repaid the balance of the statement in full before the payment due date shown on the statement you will not be charged interest.

Many thanks

See above replies.

DoctorStrange

Thanks for the replies.

The only reason I use the card is for the added protections and so I normally just sweep cash to it when needed. However, someone mentioned that might be one reason my credit score is falling so I started leaving a balance over there statement date.

It seems the estimated interest doesn't apply though given its paid off before the due date so all's well again