Grace period and repaying credit cards after interest was triggered

johnte

I'd like to confirm my understanding with some of you who are more knowladgeable. Example:

• statement shows 1000 GBP total, out of which 50 GBP is interest from not paying previous statement by due date
• 2 days after statement is produced i make another purchase of 100 GBP (balance now 1100)
• 2 days later (4 days after statement is produced) I repay 1000 GBP to the card, i.e. pay the statement in full, not the balance in full, balance now 100
• 2 days later (6 days after statement is produced) I make another purchase of 200 GBP balance now 300
• no other actions until the next statement date, whose date is later.

I'm aware that purchases made in the previous cycle will continue to accrue interest until the 1000 repayment. Also aware the 100 purchase will start accruing interest immediately. So there will be interest showing on the next statement regardless.

Where things get fuzzy is when exactly the grace period gets reinstated.

Does the repayment of 1000 stop the accruing of interest for the 100 and 200 purchases and reinstate the grace period for these two? if not, what if I repaid 2000 GBP instead of 1000 GBP (that is, to ensure it covers any interest accrued until that point), then 2 days later make the 200 purchase, would that prevent any interest from accruing for the 200 purchase?

… or does interest accrue for the 200 purchase regardless of how much I repay 2 days earlier, and will only stop accruing if the next statement shows at most 0 balance? in other words, I need to wait until the next statement (which must be at most 0) in order to regain the grace period for any new purchases?

Is there any authoritative URL that clearly explains the process in these scenarios?

born_again

So long as statement is paid in full, you should be OK. Just be aware that there will be a bit of trailing interest from the statement you have just paid in full. This is from date statement is produced to the date you make the full payment.

p00hsticks

My understanding is that once interest is charged you need to pay both that statement balance and the one on the following statement in full to prevent further interest on the next one..

Brie

I would say that once the interest has been triggered on new purchases that will continue until those purchases are paid in full. So you would have to pay £1100 instead of just the £1000. But there will also be interest on both so to minimise that I'd pay an extra £5. I don't think the £200 also accrues interest once you're down to a credit balance. But frankly it's at that point I contact the card company and ask. And keep a note of the person, time, date, etc and what they've said. That way if they get it wrong you can go back and complain.

MyRealNameToo

Once interest has started to be charged you need to clear the statemented balance two times in a row to then return to the up to 56 days interest free period. What happens in terms of additional purchases/refunds post the statement is irrelevant.

redux

Some slightly ambiguous replies above. Interest has not yet been triggered on the new purchases.

There will be a modest amount of interest added for the few days on the £1000 from the statement. So it was good to pay this early rather than wait until approaching the due date. Sending two or three quid more now would save a few pence more by then, up to you whether you think that's worthwhile.

But there is no need to send an extra £100 or other amount yet. The new purchases will not incur interest if next statement is repaid in full

born_again

https://forums.moneysavingexpert.com/discussion/comment/82003113#Comment_82003113

OP said

• statement shows 1000 GBP total, out of which 50 GBP is interest from not paying previous statement by due date

So interest will be due on £1000 from date payments hit account. As you only get 56 days free, if you pay each statement in full.

So in OP example they need to pay the statement in full, then will have some trailing interest from when the £1K debited till when the statement was paid in full. Then do the same on the next statement.

redux

https://forums.moneysavingexpert.com/discussion/comment/82003534#Comment_82003534

Are you agreeing or disagreeing with me?

I was talking about now, not how the previous interest arose.

Now that the £1000 on the statement is paid off, there will not be further interest on it, only the two or three quid interest charge for the few days from statement to payment, plus a few pence on thst

I say again, there won't be interest on the current spending if the next statement is paid in full. The reason I said this is because some posts above seem to speculate there would be.

johnte

https://forums.moneysavingexpert.com/discussion/comment/82003609#Comment_82003609

Many thanks for replying. I'd like to pick on your answer as it stands out form the more vague ones above it. So to iterate on the following succession of actions from my original post:

1. statement shows 1000 GBP total, out of which 50 GBP is interest from not paying previous statement by due date (grace period lost, trailing interest also accruing)
2. two days after statement is produced i make another purchase of 100 GBP (balance now 1100)
3. two days later (4 days after statement is produced) I repay 1000 GBP to the card, i.e. pay the statement in full, not the balance in full, balance now 100
4. two days later (6 days after statement is produced) I make another purchase of 200 GBP balance now 300
5. no other actions until the next statement date, whose date is later.

Reading your messages, are you claiming and implying the following:

• there won't be interest charged on the 100 GBP from step 2 as long as the next statetement is paid in full
• there won't be interest charged on the 200 GBP from step 3 as long as the next statetement is paid in full
• whatever interest is shown on the next statement will only come from the trailing interest from the 1000 that accrued until that was paid off at step 3
• if the next (2nd) statement isn't paid in full then both the 100 and the 200 purchases would show interest on the following (3rd) statement, computed from the moment said purchases were made

?

Various online material implied that at least the 100 purchase in step 2 will start accruing interest immediately that would show on the next statement regardless because the account is in "no grace period" mode, while other online material implied the 200 purchase in step 4 would also accrue interest that will show on the next stetement (because according to them the grace period once lost can only be reinstated when a statement shows at most 0 balance or if two statements in a row are paid in full, but no online material I found managed to address the issues surroundoing purchases made during those time points).

redux

Yes, that is how I intend to say it. You've repaid in full as per the statement. The next statement interest will be 4 days on £1000, probably about £2 or £3 depending on the rate, plus 27 days on this £2 or £3.

I don't know why some folks think that interest is already being applied to new purchases in that position. Those new purchases have not yet appeared on a statement. Only if next is not repaid in full by due date is the interest applied, backdated to purchase date. But it sounds like you're planning to cover the next statement in full

johnte

@redux Thanks again. That was also my understanding from reading the (albeit, terse) rules from banks, but then a ton of online material made it more confusing - and I see I'm not the only one. Leaving here my understanding as a note to self (maybe others will benefit too):

• Every purchase has a shadow interest accruing the moment it is made, which is wiped if the next statement is paid in full, or otherwise gets applied on the subsequent statement.
• Interest on a purchase is realized only when a statement shows positive interest amount, and said interest on said purchase continues to accrue until the day said statement is paid in full.
• The order of purchases and repayments after a statement is produced is irrelevant. Every repayment first counts towards the previous statement, regardless of whatever purchases are made in between (e.g. part repayment, purchase, part repayment, purchase …). If the total amount of all repayments exceeds the previous statement balance then any purchase made after that statement is produced will not produce any interest on the next (2nd) statement (but this next statement will likely show some nonzero interest due to the trailing interest from the previous statement).