Calculating Interest

basketcase

Hi!

Probably being thick but...

I have a Tesco Credit Card. When the statement comes it estimates the amount of interest to be deducted next month if I only pay the minimum amount before the 20th - if I pay it all I don't get charged interest at all.

I've been paying off the full amount, but last month it was a bit more than I had before I got paid, so I paid just over half (WAAAAAAAY above the minimum!) on the 14th and the remainder on the 25th (payday).

So why have they deducted the whole amount of the interest? How do they work out how much to charge and when do they charge from?

CLAPTON

They charge you interest on a daily basis from the day you make the purchase to the day you pay it off.

However, if and only if, you pay in FULL then they write off the interest.
If however, you only pay part payment then charge interest as above.

Also note that your new statement will only have the interest up to the statement date so even if you now pay in full there will be some residual interest reflecting the time between the statement date and the date you actually pay.

all CC work like this
You need to pay in full for two consecute months to stop interest accruing further.

basketcase

CLAPTON wrote: »

They charge you interest on a daily basis from the day you make the purchase to the day you pay it off.

However, if and only if, you pay in FULL then they write off the interest.
If however, you only pay part payment then charge interest as above.

Also note that your new statement will only have the interest up to the statement date so even if you now pay in full there will be some residual interest reflecting the time between the statement date and the date you actually pay.

all CC work like this
You need to pay in full for two consecute months to stop interest accruing further.

Thanks Clapton. It's depressing, but thanks!:rolleyes:

DestroyingAngel_2

Basketcase, if you always pay off your balance in full and on time you'll never see interest. However, whilst you did indeed meet the requirement for the minimum payment, you still did not pay off the balance IN FULL AND ON TIME, hence the interest. Your first payment would have reached on time, but your second did not - it was AFTER the due date. Interest would have been calculated on the remaining balance outstanding on your account.

Speak to Tesco Cards and ask if they can change your due date so the money is called for AFTER you've been paid each month. This should prevent you from falling into hardship each month.

basketcase

DestroyingAngel wrote: »

Basketcase, if you always pay off your balance in full and on time you'll never see interest. However, whilst you did indeed meet the requirement for the minimum payment, you still did not pay off the balance IN FULL AND ON TIME, hence the interest. Your first payment would have reached on time, but your second did not - it was AFTER the due date. Interest would have been calculated on the remaining balance outstanding on your account.

Speak to Tesco Cards and ask if they can change your due date so the money is called for AFTER you've been paid each month. This should prevent you from falling into hardship each month.

Thanks Angel (or may I call you Destroying?!:rotfl: )

What I hadn't appreciated was that paying off anything but the whole amount meant that you got charged interest on the WHOLE AMOUNT. I thought I'd only get charged interest on the half I hadn't paid. Had an unexpected (large) bill and had to wait till pay day to pay the other half.

That's what I like about this board - there's always someone who can suggest something you haven't thought of. Never occurred to me to change the date. What a dope!

Milarky

basketcase wrote: »

What I hadn't appreciated was that paying off anything but the whole amount meant that you got charged interest on the WHOLE AMOUNT. I thought I'd only get charged interest on the half I hadn't paid. Had an unexpected (large) bill and had to wait till pay day to pay the other half.

That's not quite accurate. The interest was nearly as much as the 'estimated' interest figure more because of when you paid it, rather than the amount paid. This is because the 'due date' often falls very close to the interest calculation (i.e. next statement) date. So if the bill is '£1000 and the minimum payment is '£20' but the statement is the day after the payment arrives a payment of '£500' only has a single day to impact on the interest due that month. (Next month is a different story, of course)