Credit Cards, interest charges.

[carl0s]

This is interesting to me. I just read the "interest charges" on the back of my statement.

 

It says that if I don't pay off the card in full, they will charge interest on each purchase until the amount I owe in full has been paid.

 

Does this mean then, if I buy something on the card for £1000, then I make an online banking payment to cover that, then I make another £1000 purchase, and do a BACS again to pay that, etc. etc., but I leave £0.02 (2 pence) owing at the end of the month, then I will be charged interest on £2000 ?

[TopgunTT]

I would just change credit card supplier, doing that every year you never pay any interest.

[carl0s]

I might be misunderstanding though. Does anybody know what's the norm, and if this is normal?

 

I think the use of "previous statement, current statement, previous balance, current balance" etc. in one long paragraph is confusing me.

[DaveK]

I might be misunderstanding though. Does anybody know what's the norm, and if this is normal?

 

I think the use of "previous statement, current statement, previous balance, current balance" etc. in one long paragraph is confusing me.

 

I think your intepretation is correct, and they charge interest on all purchases even if you'd paid some off.

 

You also have to be careful about dates. I once had another cardholder on my account - and since she didn't understand credit cards she was stupid enough to take £10 in cash out. I pay the balance on my cards every month - but obviously you still get charged interest on a cash advance. But I was charged interest for two months - the second month because there is a period between the statement being issued and my direct debit paying the bill - so I accrued interest for that period as well.

[supra_aero]

This is interesting to me. I just read the "interest charges" on the back of my statement.

 

It says that if I don't pay off the card in full, they will charge interest on each purchase until the amount I owe in full has been paid.

 

Does this mean then, if I buy something on the card for £1000, then I make an online banking payment to cover that, then I make another £1000 purchase, and do a BACS again to pay that, etc. etc., but I leave £0.02 (2 pence) owing at the end of the month, then I will be charged interest on £2000 ?

 

 

What it means is..

 

If you spend £1000 today (July).

 

and pay off £500 at end of the month.

 

your balance is thus £500.

 

Now if you spend another £1000 next month (August) and pay off £1000.

 

The balance is still £500, but the interest you will be paying is that from July not August.

 

Hope that makes sense. I think that's right anyway

[stevie_b]

Are you talking about an introductory offer (e.g. balance transfer), or something in the ongoing terms & conditions? If it's an ongoing T&C, then I would expect you to have to pay interest on the outstanding balance only.

[bolarbag]

Its something similar to that, I used to work in the financial industry, I always remember being shocked at how they rotate purchases and cash withdrawals,

 

If you take cash out your rate of interest is at the higher rate until you pay off the full balance, it would then return to what was initially agreed, i.e their APR maybe 10%, cash withdrawals 25%, if you took cash out then purchases, that cash stays at the bottom of the pile gathering 25%interest until you pay it off, regardless if you had made purchases much later than the cash withdrawals

 

In your case what their saying is they will charge interest on the purchase, but not on the full balance, so if you have only purchased items on it, the interest will be on the balance outstanding - but it depends on the wording as some companies can charge for the full purchase balance all month long

[DaveK]

If you take cash out your rate of interest is at the higher rate until you pay off the full balance, it would then return to what was initially agreed, i.e their APR maybe 10%, cash withdrawals 25%, if you took cash out then purchases, that cash stays at the bottom of the pile gathering 25%interest until you pay it off, regardless if you had made purchases much later than the cash withdrawals

 

A few credit card companies don't do this now (although most do). I believe Nationwide debits disappear from the balance in the order they were made - so if you make a cash purchase and then other purchases, the cash one will be the first to disappear - and the interest rate will return to normal as soon as it's gone.

[supra_aero]

A few credit card companies don't do this now (although most do). I believe Nationwide debits disappear from the balance in the order they were made - so if you make a cash purchase and then other purchases, the cash one will be the first to disappear - and the interest rate will return to normal as soon as it's gone.

 

really?

 

thats very good

[DaveK]

really?

 

thats very good

 

Actually, I just checked and it looks like it's better than that. In fact - they say they pay off your most expensive (to you) transactions first.

 

So if you made a dozen purchases, then withdrew cash just before your statement was issued - it looks like any payment you made would reduce the cash part first, even though the "cheaper" debits were made earlier.

 

Seems quite nice of them!

[carl0s]

It's not an introductory offer. It's my Morgan Stanley card. Here's what it says:

Interest We will not charge interest on any Purchase shown on your current statement if you pay in full the Statement Balance shown on your current statement by the Payment Date. If you pay in full the Statement Balance shown on your current statement by the Payment Date but you did not pay in full the Statement Balance shown on your last statement by the Payment Date, we will charge interest on each Purchase shown on your last statement from the relevant Transaction Date until you have paid the amount you owe us in full. We charge interest daily on Balance Transfers from the date they are charged to you Account and on Cash Advances from the date they are made, until you have paid the amount you owe us in full. the interest amount increases the longer you take to make full Payment (even before the Payment Date). You may write to us to request details of the interest rates that apply to you and an explanation of how we have calculated interest on your Account.

 

My concern is that I made some business purchases last month. I quickly made individual BACS payments to cover those exact amounts, so that from an accounts perspective I can see that the BACS payments were business payments rather than me just paying off my personal credit card. I still left £199 owing on the card at the end of the month though, because they were non-business purchases that I need to pay off out of my wages rather than have the company pay off.

 

I reckon I might have been charged interest on the business purchases, even though I paid them off right away. What's getting me is that they say they charge interest on the Purchases, rather than just on the balance owing.

[carl0s]

Are you talking about an introductory offer (e.g. balance transfer), or something in the ongoing terms & conditions? If it's an ongoing T&C, then I would expect you to have to pay interest on the outstanding balance only.

 

That's what I would have expected, but I don't think that's the case.

[Feakins]

I would of thought it just means they carry on charging interest on the amount owing until it is repaid in full.

[DaveK]

I think they are only talking about interest-per-purchase if you clear the balance after you've previously not. They are basically saying that once you've failed to pay the balance in full one month, then any new purchases are charged interest from the date you make them - hence if you pay the balance in full the following month then you are not getting an interest-free grace period for those new transactions - which you usually get if you have no standing balance.

 

This doesn't mean they continue to charge interest on those purchases in future - the interest calculation is still on the outstanding balance.

 

To put it simply :

 

I pay my card off every month. Hence - if I buy something for £500 today it is essentially interest free until the end of the month.

 

You didn't pay your balance off. Hence if you buy something for £500 today it will immediately start accruing interest. Hence if you pay your bill off in total at the end of the month you will pay interest on that £500 purchase (plus any outstanding balance) - whereas I didn't, even though we both cleared the bill this month.

 

Edit : Note that they charge interest daily so I think you will only be charged interest for those business transactions between the date you made them and the date you paid for them.

[carl0s]

I see. Thanks Dave. Although they they refer to items on the last statement.

 

This shouldn't be so confusing should it?

[carl0s]

"to remain interest free a card has to be paid in full for 2 consecutives months"

 

Well I never. So I really shouldn't be using my credit card for business purchases, unless the balance is generally paid absolutely in full every time. but even so, the key question is are they charging interest on Purchases, or on the balance owing?

 

I only have a £2,800 limit, but I could make £90,000 worth of purchases in a month by making a card purchase, and then making a BACS payment to cover it, then doing another purchase, and keep doing that every day of the month.

[carl0s]

Will see what the MoneySavingExperts say :

http://forums.moneysavingexpert.com/showthread.html?p=12732463