Credit Card Interest

Hamiltonc

Is there a free and easy to use UK credit card interest calculator where you can enter a balance and interest rate and it'll give you the expected interest?

I am not sure one credit card has charged the correct interest - the value seems very high!!!!

amanda1024

If you have a calculator (e.g. on your phone), try balance × interest rate × number of days ÷ 365

CliveOfIndia

amanda1024 said:

If you have a calculator (e.g. on your phone), try balance × interest rate × number of days ÷ 365

This will give you a reasonably good estimate, for sure.

OP, it can be tricky to get an exact figure because interest is calculated daily on each transaction.  So a transaction that happens on the first date of your billing cycle will accrue more interest (by the end of the billing cycle) than a transaction that occurred later on (one transaction may attract 30 days' worth of interest whereas a later transaction may only attract 10 days of interest).

But yes, the calculation provided by the previous poster will give you a near-enough approximation.

Do remember, as well, that if you don't clear the full balance then interest is charged on the full balance, not just the bit that's left over after you've made a partial payment.  This is something that can catch a lot of people out.

Superhoopza

CliveOfIndia said:

amanda1024 said:

If you have a calculator (e.g. on your phone), try balance × interest rate × number of days ÷ 365

This will give you a reasonably good estimate, for sure.

OP, it can be tricky to get an exact figure because interest is calculated daily on each transaction.  So a transaction that happens on the first date of your billing cycle will accrue more interest (by the end of the billing cycle) than a transaction that occurred later on (one transaction may attract 30 days' worth of interest whereas a later transaction may only attract 10 days of interest).

But yes, the calculation provided by the previous poster will give you a near-enough approximation.

Do remember, as well, that if you don't clear the full balance then interest is charged on the full balance, not just the bit that's left over after you've made a partial payment.  This is something that can catch a lot of people out.

That last paragraph, could you explain that a bit more please? Surely if you are paying interest per month then making a partial payment means from the date of that partial payment you won't be paying interest anymore?

CliveOfIndia

Superhoopza said:

CliveOfIndia said:

amanda1024 said:

If you have a calculator (e.g. on your phone), try balance × interest rate × number of days ÷ 365

This will give you a reasonably good estimate, for sure.

OP, it can be tricky to get an exact figure because interest is calculated daily on each transaction.  So a transaction that happens on the first date of your billing cycle will accrue more interest (by the end of the billing cycle) than a transaction that occurred later on (one transaction may attract 30 days' worth of interest whereas a later transaction may only attract 10 days of interest).

But yes, the calculation provided by the previous poster will give you a near-enough approximation.

Do remember, as well, that if you don't clear the full balance then interest is charged on the full balance, not just the bit that's left over after you've made a partial payment.  This is something that can catch a lot of people out.

That last paragraph, could you explain that a bit more please? Surely if you are paying interest per month then making a partial payment means from the date of that partial payment you won't be paying interest anymore?

Every transaction you make starts accruing interest from the date it hits your account.  And interest is accrued on a daily basis, not monthly.  Come the end of the month (well, the end of your billing cycle), when you get your statement it'll show the total of all spending you've put on the card.  But "behind the scenes", as it were, is all the interest that's accrued over the month.

If your balance is £1000 and you pay off £1000 by the due date, all the accrued interest is waived.  But if you pay £999 then all the accrued interest is charged - not just interest on £1.

And since interest is charged daily from the date of the transaction until it's paid, you will also get trailing interest on the next month's statement.  So generally, if you've not cleared the statement in full, you need to clear the next 2 statements in full to get back to square 1, as it were.

If you Google for "trailing interest" you'll find any number of articles that show how it works - it can seem pretty complicated, but it's actually quite simple and logical when you see a worked example.

Superhoopza

CliveOfIndia said:

Superhoopza said:

CliveOfIndia said:

amanda1024 said:

If you have a calculator (e.g. on your phone), try balance × interest rate × number of days ÷ 365

This will give you a reasonably good estimate, for sure.

OP, it can be tricky to get an exact figure because interest is calculated daily on each transaction.  So a transaction that happens on the first date of your billing cycle will accrue more interest (by the end of the billing cycle) than a transaction that occurred later on (one transaction may attract 30 days' worth of interest whereas a later transaction may only attract 10 days of interest).

But yes, the calculation provided by the previous poster will give you a near-enough approximation.

Do remember, as well, that if you don't clear the full balance then interest is charged on the full balance, not just the bit that's left over after you've made a partial payment.  This is something that can catch a lot of people out.

That last paragraph, could you explain that a bit more please? Surely if you are paying interest per month then making a partial payment means from the date of that partial payment you won't be paying interest anymore?

Every transaction you make starts accruing interest from the date it hits your account.  And interest is accrued on a daily basis, not monthly.  Come the end of the month (well, the end of your billing cycle), when you get your statement it'll show the total of all spending you've put on the card.  But "behind the scenes", as it were, is all the interest that's accrued over the month.

If your balance is £1000 and you pay off £1000 by the due date, all the accrued interest is waived.  But if you pay £999 then all the accrued interest is charged - not just interest on £1.

And since interest is charged daily from the date of the transaction until it's paid, you will also get trailing interest on the next month's statement.  So generally, if you've not cleared the statement in full, you need to clear the next 2 statements in full to get back to square 1, as it were.

If you Google for "trailing interest" you'll find any number of articles that show how it works - it can seem pretty complicated, but it's actually quite simple and logical when you see a worked example.

That doesn't seem right surely? So by that logic, there is no point paying the £999 the day after your statement date or waiting until your due date? I thought I was clued up on this but what am I missing?

Having read an article like you said, I think, we may be talking about the same thing but in a different way. If my statement balance was £1000 but half way through the billing cycle I pay off £500, I will pay daily interest for half a month on £1000 (first half of the billing cycle) and daily interest for half a month on £500 (second half of the billing cycle), not a full months interest on £1000. Which is how I would expect it to be, if you don't pay your balance in full, you pay daily interest on whatever your running balance is, not a statement balance. Have I understood correctly?

CliveOfIndia

Superhoopza said:

That doesn't seem right surely? So by that logic, there is no point paying the £999 the day after your statement date or waiting until your due date? I thought I was clued up on this but what am I missing?

To avoid paying interest, you wait until the statement arrives, then pay the full balance by the due date.

But if you know you're not going to pay the full balance then yes, the sooner you make a payment the better - this will reduce the number of days' interest that accrues.  Bear in mind that a transaction may not get statemented immediately, there can be a day or two lag.  But that's probably not important in the grand scheme of things - if you're only going to make a partial payment then make it as soon as possible, no need to wait until the statement arrives.

But if you do this, it's really important to remember that you'll still have to make at least the minimum payment when you get the statement.  If you make a partial payment mid-month before your statement gets generated, the minimum payment will be calculated based on the current balance, and you must still make the minimum payment - in addition to any partial payment you've made mid-cycle.

Superhoopza said:

Having read an article like you said, I think, we may be talking about the same thing but in a different way. If my statement balance was £1000 but half way through the billing cycle I pay off £500, I will pay daily interest for half a month on £1000 (first half of the billing cycle) and daily interest for half a month on £500 (second half of the billing cycle), not a full months interest on £1000. Which is how I would expect it to be, if you don't pay your balance in full, you pay daily interest on whatever your running balance is, not a statement balance. Have I understood correctly?

Yes, that's pretty much it.

To be pedantic, it's not exactly half a month on £1000 and half a month on £500.  Each individual transaction begins to accrue interest individually from the date it's posted - so you may get 15 days interest on one transaction, 10 days on another and 3 on another, etc.  But yep, as near as makes no difference you're right.

It's where you wait until you get the statement then make a partial payment, that's when you get hit with the full amount of interest.  If you make an interim partial payment, it will reduce the amount of interest you pay.

grumbler

MSE:  How do credit cards work?

Superhoopza

CliveOfIndia said:

Superhoopza said:

That doesn't seem right surely? So by that logic, there is no point paying the £999 the day after your statement date or waiting until your due date? I thought I was clued up on this but what am I missing?

To avoid paying interest, you wait until the statement arrives, then pay the full balance by the due date.

But if you know you're not going to pay the full balance then yes, the sooner you make a payment the better - this will reduce the number of days' interest that accrues.  Bear in mind that a transaction may not get statemented immediately, there can be a day or two lag.  But that's probably not important in the grand scheme of things - if you're only going to make a partial payment then make it as soon as possible, no need to wait until the statement arrives.

But if you do this, it's really important to remember that you'll still have to make at least the minimum payment when you get the statement.  If you make a partial payment mid-month before your statement gets generated, the minimum payment will be calculated based on the current balance, and you must still make the minimum payment - in addition to any partial payment you've made mid-cycle.

Superhoopza said:

Having read an article like you said, I think, we may be talking about the same thing but in a different way. If my statement balance was £1000 but half way through the billing cycle I pay off £500, I will pay daily interest for half a month on £1000 (first half of the billing cycle) and daily interest for half a month on £500 (second half of the billing cycle), not a full months interest on £1000. Which is how I would expect it to be, if you don't pay your balance in full, you pay daily interest on whatever your running balance is, not a statement balance. Have I understood correctly?

Yes, that's pretty much it.

To be pedantic, it's not exactly half a month on £1000 and half a month on £500.  Each individual transaction begins to accrue interest individually from the date it's posted - so you may get 15 days interest on one transaction, 10 days on another and 3 on another, etc.  But yep, as near as makes no difference you're right.

It's where you wait until you get the statement then make a partial payment, that's when you get hit with the full amount of interest.  If you make an interim partial payment, it will reduce the amount of interest you pay.

Yeah we were saying the same thing just in a different way. Thanks

Hamiltonc

CliveOfIndia said:

amanda1024 said:

If you have a calculator (e.g. on your phone), try balance × interest rate × number of days ÷ 365

This will give you a reasonably good estimate, for sure.

OP, it can be tricky to get an exact figure because interest is calculated daily on each transaction.  So a transaction that happens on the first date of your billing cycle will accrue more interest (by the end of the billing cycle) than a transaction that occurred later on (one transaction may attract 30 days' worth of interest whereas a later transaction may only attract 10 days of interest).

But yes, the calculation provided by the previous poster will give you a near-enough approximation.

Do remember, as well, that if you don't clear the full balance then interest is charged on the full balance, not just the bit that's left over after you've made a partial payment.  This is something that can catch a lot of people out.

It didn't work unfortunately....no I don't put transactions on it, it's just finished interest free period 

Hamiltonc

amanda1024 said:

If you have a calculator (e.g. on your phone), try balance × interest rate × number of days ÷ 365

It didn't work unfortunately....