Very basic credit card terminology question

Rosenkrantz

Hi all, I am new here and really struggle with understanding financial terminology, so would appreciate some 'credit cards for dummies' help if possible!

I am applying for my first ever credit card and they are asking if I want the repayment amount to be either A. a minimum amount, B. the full amount, or C. a fixed amount. 

Under 'full amount' it says, as an explanation, 'pay the entire balance of your bill each month' - 'entire balance' doesn't mean the entire AMOUNT that you have used the credit card for, right? it means that amount divide by however many months you are going to pay it over? Why would anyone NOT choose this option?

And how is 'fixed amount' different to 'full amount' - surely if you are repaying a certain figure over eg 12 months, that figure divided by 12 is going to be fixed each month?

Many thanks in advance!

TadleyBaggie

Rosenkrantz said:

Under 'full amount' it says, as an explanation, 'pay the entire balance of your bill each month' - 'entire balance' doesn't mean the entire AMOUNT that you have used the credit card for, right? it means that amount divide by however many months you are going to pay it over? Why would anyone NOT choose this option?

No, 'full amount' means that whatever the balance on the latest statement is, that is what will be requested. There is no concept of 'months to pay it over' with credit cards. This is the preferred option to avoid interest charges (unless this is a 0% card).

JGB1955

Paying the full amount means paying the total amount on the statement NOW (well, by the date shown on the statement) , NOT over the next * numbers of months.  Paying a fixed amount is going to end up in you paying interest.

JGB1955

Under 'full amount' it says, as an explanation, 'pay the entire balance of your bill each month' - 'entire balance' doesn't mean the entire AMOUNT that you have used the credit card for, right? i

Yes. that's precisely what it means.

km1500

If you don't pay off the balance spent in that month you will get charged interest on everything you spent that month

So if your statement balance is £1000 and you pay off £999 then you still get charged interest on the £1000 of spending - you have to pay it all off to avoid interest

JES_F1

You might find the MSE guide for getting your first credit card useful.

Rosenkrantz

Ah ok. I am talking about a 0% card - the reason I am applying for one is that I can't afford to pay the full amount for most large purchases 'NOW,' and need to cost to be spread over several months.

So with normal credit cards, how long do you get between using the card to pay for something and receiving a statement asking for the balance to be settled? 

Rosenkrantz

km1500 said:

If you don't pay off the balance spent in that month you will get charged interest on everything you spent that month

So if your statement balance is £1000 and you pay off £999 then you still get charged interest on the £1000 of spending - you have to pay it all off to avoid interest

thanks. Ok, so, next silly question - why would someone use a credit card for doing this and not just a regular debit card?

Rosenkrantz

JES_F1 said:

You might find the MSE guide for getting your first credit card useful.

Perfect, many thanks!

daveyjp

Rosenkrantz said:

So with normal credit cards, how long do you get between using the card to pay for something and receiving a statement asking for the balance to be settled? 

Statement date will be fixed, how long you get between using the card to pay for something and the statement date is therefore any time between 30 days and 1 day,

My statement date is about 23rd of the month.  If I use it on 23rd I will get a full month, if I use it on 21st I may get 2 days (depending on process time between pending and clearing).

You then get 2-3 weeks from statement date to pay.

Rosenkrantz

daveyjp said:

Rosenkrantz said:

So with normal credit cards, how long do you get between using the card to pay for something and receiving a statement asking for the balance to be settled? 

Statement date will be fixed, how long you get between using the card to pay for something and the statement date is therefore any time between 30 days and 1 day,

My statement date is about 23rd of the month.  If I use it on 23rd I will get a full month, if I use it on 21st I may get 2 days (depending on process time between pending and clearing).

You then get 2-3 weeks from statement date to pay.

so in this scenario, is the benefit that you have a few more days grace to find the money for something as compared to paying with cash/a debit card? I'm basically struggling to understand why someone would use a credit card that doesn't have 0% interest