Statement vs Due Date Balance

garybaldy

In order to avoid credit card interest, do I need to pay the balance on my monthly statement or the balance on my account on or before the payment due date?

My question relates to refunds. For example, lets say the statement balance is £500 which includes an online purchase of an item that cost £100. I return the item shortly before or after the statement date and the refund is applied to my account before the payment due date. So by the the due date there is only £400 remaining on my account.

If I pay the £400 by the due date will I avoid any interest?

I guess I'm asking if the refund counts as a 'payment'?

MorningcoffeeIV

Depends on the card provider.

mta999

Usually a refund does not count as a payment towards the statement balance although I believe a very few cards do count it

not very helpful I know so I guess I'm saying either call them and ask or look at the terms and conditions of your card

If you tell us your specific card someone might know for sure

Woodstok2000

I can only say based on my experience, but with both nationwide and Halifax as long as the statement balance is covered by the due date there is no interest. I've had a couple of scenarios like the one you noted above with the refund, I paid the difference (so £400 in your example) and it was treated as me paying the full statement balance.

garybaldy

I just checked with my own credit card provider. After a lot of back and forth on the chat they said (in relation to refunds):
"…a merchant refund will be considered as [a] payment"

Other card companies may view it differently. You can ask your own provider but I found it difficult to phrase the question in a way that a call centre agent understands what you're asking!

TadleyBaggie

I've always only paid the statement balance before the due date and have never incurred interest yet.

la531983

Surely in this example of course it will because the balance will be £0.

But lets say your minimum payment was £100 and thats all you could afford to pay off, the refund wouldnt necessarily count as a payment and you may still have to pay £100.

CliveOfIndia

You need to pay the balance as defined on the statement. Particularly if the refund has been received after the statement is produced.

As others have said, different cards treat refunds differently. But to avoid interest, you need to pay the full statement balance (whatever that's made up of), there's no point in trying to overthink it. Any refunds will simply mean that your statement balance will be proportionally less next month.

la531983

https://forums.moneysavingexpert.com/discussion/comment/82056151#Comment_82056151

Are you claiming that if my statement balance was £2000, and then two days later I received a refund for a holiday from TUI for £1900, and paid the remaining £100 off to leave my account with zero balance, I would be charged interest and I really should have paid £2k to leave my card with a credit balance of £1900?

Pretty sure thats not how it works.

CliveOfIndia

https://forums.moneysavingexpert.com/discussion/comment/82056204#Comment_82056204

It really depends on how the card issuer treats refunds - which will be different from one provider to another.

If you can afford it, the absolute safest way is to pay the statement balance irrespective. If that leaves you with a large credit balance, you can either request a refund to your bank account from the card issuer, or you can just let it sit there and use it up via routine spending over the next month or so (obviously it depends on your usual usage pattern).

Carrying a credit balance because of a refund doesn't present the same issues as deliberately overpaying to put the account into credit.

If this approach would leave you short, then you need to speak to the card issuer to get absolute confirmation of how much is actually outstanding on their systems.

TadleyBaggie

Sainsbury's Bank (RIP) never took any notice of refunds or balance transfers, when taking their DD. I once did a balance transfer of £1400 or so, two weeks before the DD was due, only to find 2 weeks later my credit card was £1400 in credit due to them taking the full DD amount.