Paying in full to avoid interest... but re-spending?
pandapaws
Posts: 2,119 Forumite
in Credit cards
Hi! I'm struggling to work this out from the T&Cs, any advice appreciated.
I have a balance on a credit card of approx £1,000 that's been running along for while with minimum and occasional repayments and re-spends, no promotional rates, costing about £20/month interest.
If I pay the full statement balance off in full before the payment-due date, but then spend on it again (either before, or after that date, if it makes a difference?), does it count as 'repaying in full' thereby meaning that I'll pay no interest the following month? So theoretically I could carry on doing this indefinitely thereby avoiding the interest completely, but never actually having to pay it off (although in reality I'll be reducing it to zero in a few months)? Or does it void the 'paid off' bit if it's re-spent again?
I can't pay it in full right now, but I could pay it in full using my monthly spend budget, and then re-use it for the groceries etc. But I'm not sure how it works with regard to dates for repayment etc if I was going to try this.
I have a balance on a credit card of approx £1,000 that's been running along for while with minimum and occasional repayments and re-spends, no promotional rates, costing about £20/month interest.
If I pay the full statement balance off in full before the payment-due date, but then spend on it again (either before, or after that date, if it makes a difference?), does it count as 'repaying in full' thereby meaning that I'll pay no interest the following month? So theoretically I could carry on doing this indefinitely thereby avoiding the interest completely, but never actually having to pay it off (although in reality I'll be reducing it to zero in a few months)? Or does it void the 'paid off' bit if it's re-spent again?
I can't pay it in full right now, but I could pay it in full using my monthly spend budget, and then re-use it for the groceries etc. But I'm not sure how it works with regard to dates for repayment etc if I was going to try this.
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Comments
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If the statement balance is paid within the provided grace period (e.g 56 days) then no purchase interest will be charged on the following statement date - excluding cash transactions. As the balance has been carried, that particular balance will continue to charge interest outside the grace (considered residual interest once paid) which I explain below. Once the new purchases are made, those qualify for 56 days interest-free however.
For example, if a statement balance of £500 was issued on 1st October, I cleared in full on 5th October and then spent another £500 on 15th October, the statement would still be considered PAID IN FULL, I would not be charged purchase interest and can repeat this month after month, provided the entire statement balance is always paid in full, not part of. Any new balance accumulated during the rest of the month is treated separate, therefore you are not essentially unpaying your statement balance by making fresh purchases.
If the balance has been carried however, bear in mind that you may still be charged on your next statement date something called trailing / residual interest, which is when a credit card bill is sent, and when payment is received. Once the residual has been cleared, the next time there won't be interest at all, provided you stick to clearing the statement balance, spending again and then clearing in full the following statement period.Advice provided from this account does not consist of any professional knowledge. For professional debt advice, please contact either National Debtline or StepChange. Advice may consist of personal experience, opinion and/or informational sources.0 -
Well explained above - you could pay in full using your spending money but will still see interest on the first statement afterwards as most cards need to be paid off in full two times in a row before all interest is avoided with the 56 days grace period rule.I’m a Forum Ambassador and I support the Forum Team on the Budgeting & Bank Accounts, Credit Cards, Credit File & Ratings and Energy boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.
If you can't be the best -
Just be better than you were yesterday.0 -
It's even better than that. If statement is issued on 1st with £500 balance you can keep spending immediately. By the time your due date arrives you could be up to £1000 ( limit permitting) As long you pay the £500 by the due date you won't pay any interest.
That is subject to trailing interest until you've cleared two consecutive balances, as said.0
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