New help understanding owed interest

ChickenKeeper3

Hi folks, my car died last month and I needed one. I wouldn’t be in a position to pay it off for a couple of weeks.

So, I put £12,299 on my Virgin Credit Card
Statement rendered on the 5th of April with a payment due by date of 24th of April.

I paid £6,000 on 11th of April
I paid £5,750 on the 16th of April
I have £549 left.

I am trying to figure out what I owe interest on a for what periods of time. It’s left me confused and questioning my existence. Phone call to Virgin made it worse.

I was told on my next statement date I will owe for the full £12,299 but then was told I would only owe for balance outstanding g (which is £549 and will be £249 by next statement date).

So utterly confused. And Virgin’s credit card statements appear to be no help.

Can someone help please?

eskbanker

If you're not repaying in full then you'll be charged interest calculated from the current balance on each day multiplied by the (daily) rate.  In other words, starting from £12,299 * (annual rate/365 [roughly]) * number of days until balance changes, and then the same calculation for the revised balance and so on.

CliveOfIndia

It's a common misunderstanding.  The way credit cards work, you make a transaction.  Interest accrues on that transaction on a daily basis, until the transaction is repaid.

If you repay the full statement balance when the statement arrives, then all accrued interest is waived.  If you pay anything less than the full balance, then the accrued interest becomes payable.

So, you put £12k on the card.  Interest accrues on this each day.  If you make a partial payment, some of this will go towards the capital, some of it will pay off the interest that's accrued.

Once you clear the entire balance, you'll have a bit of trailing interest left to repay.  Once you've paid two consecutive statements in full, you'll be in the clear.

It can be confusing, but that's how all credit cards work.  If you make a partial payment, the accrued interest from the full balance is due - not just the interest on the remaining portion.  Although, of course, interest then starts accruing on a lower amount, since you've paid some of it off.

ChickenKeeper3

Ok, given that information, I've just paid the remaining £549 (I'll go lean on other things).

Hopefully that allows me to clear trailing interest up a bit faster.

CliveOfIndia

ChickenKeeper3 said:

Ok, given that information, I've just paid the remaining £549 (I'll go lean on other things).

Hopefully that allows me to clear trailing interest up a bit faster.

If you've cleared the outstanding £549 just now, before the statement is produced, then that will mean you end up paying slightly less interest overall.  But do make sure you pay the statement in full when it comes (there will very likely be a small amount on there due to trailing interest).  Then, next month's statement may well be zero (assuming you've put no more transactions on it, and depending on your statement cycle, and when the payment was received), but make sure you check it and pay it off if required.  After paying off two month's consecutively in full, you'll have no further interest to worry about.