If you don't pay off your CC in full do you pay interest on the whole balance or just the bit you didn't pay off?

[KatyMac]

Thanks

Surely the whole balance would be the bit you didn't pay off?

I'm pretty sure it's on the whole of the balance prior to the bit you paid off. So if your balance was e.g. £800, you paid off £200, you'd still be paying interest on the £800 for that month because you didn't clear the bill entirely. Whereas next month, your bill would be £600, assuming you hadn't put any more onto it, then you'd pay interest on the £600 - that was always my understanding of how it (annoyingly) worked.

Happy to be proved wrong though!

Damn
I normally pay the whole lot off, but post Christmas was a bit heavy with school stuff (music lessons etc)
So if Jan bill was £1800 & I paid off £1600 by the due date I'd still pay interest on the whole £1800

Oh poo

I think so - but can you check your terms and conditions to make sure? or just ring the customer helpline?

Thumbdabwitch is correct.

I've been caught out by that before. Sorry.

The whole lot. Including interest on the interest if there is any. And then the following month, the whole lot again including interest on the interest on the interest, then the following month the whole lot including interest on the interest on the interest on the interest, and so on...

This is how Compound Interest works. And why most people will never clear their Credit Card debt.

no I'm sure that's not right, Mummymayhem - as you pay off some of the bill, the interest goes down, so you can't still be paying interest on the original uncleared amount.

I normally clear mine every month

I'll borrow from my mum as it is a cash flow issue rather than not having the money (fingers crossed)

You pay interest on all of the outstanding amount, which includes interest. And interest on interest, etc. This is what is meant by interest being 'Compounded'.

Sorry KatyMac, for the slight hijack.

Yes, the outstanding amount, not the "whole" amount, as you said in your first post.

you only pay interest on the outstanding balance, not anything you have already paid.

Sorry, by the whole lot I meant the outstanding balance. So, if your balance is GBP -1,284, then you pay interest on GBP 1,284. Even if you have paid interest on all or some of that amount previously.

ah yes, you do eg if your APR is 20% you pay approx 1.5% interest every month on the whole outstanding balance for that month.

HTH

No Katy.

Say you had a balance of £1800 in Jan, with a due date of 16th Jan.

On 15th Jan, you pay £1600.

That leaves you a balance of £200.

So, you pay interest on the £200 until the due date of 16th Feb.

Now, due on 16th of Feb, you have a balance of, say, £248. (£200 original balance, £48 interest).

On 15th Feb you pay of £10.

So, you will pay interest on the £200 original balance, and £38 of the interest from the last bill, so £238.

So, due on 16th March, you have a balance of £200 original, £38 interest from previous bill, and £56 interest from current bill. So your balance total is now £294

On 15th March, you pay another £10.

And so on.

Which is why people who pay the minimum payment will never clear their bill, because they always accrue more interest than they are clearing.

But you have will just have the sting of interest on £200. Not a problem, as long as you now clear.

Ok lost again (sorry)

have balance in Jan 1800 to be paid on 12 Feb
pay 1600 off by 12 Feb
Will have balance in Feb of (whatever you spend)+200+interest on 200 to be paid on 12 Mar

Well, only if you get a 'so many days to pay...' clause.

So, if you have 6 weeks to pay, then yes,

In March you will have a balance of

£200
+
interest on £200
+
Spending from Feb.

My statement says on the bottom how much interest they calculate I will pay if I don't pay in full by the due date. Does yours not have something like that?

i think I need

You only pay interest on the outstanding balance.

So for example, I have a balance of £1000 and I pay off £500 by the payment date. From that day onwards, I am only being charged interest on the remaining £500.

Otherwise you could never have a rolling balance, because you would be being charged interest on an amount that you paid off months ago until you got it down to zero, which isn't how it works.

So Katy, in your case if you pay off £1600 then for the following month you will only be charged interest on the remaining £200.
What you need to watch out for, is how long your bank will take to clear the funds. My online banking says very clearly that as soon as I make a payment out of my current account or savings account onto my credit card, it is counted for interest purposes immediately - ie. I immediately stop being charged interest on the amount I have paid off.
Where you could possibly get caught is if your card is with another bank or provider, in which case it may take a few days for the money to transfer. If that is the case then I would make your payment tonight or first thing tomorrow so that it has time to make it's way through the ether!

Aha! But yes, you will only be charged interest on the outstanding balance from the date on which you have paid off part of the bill - you will be charged interest on the FULL amount of the bill UP UNTIL the payment date, because you didn't clear it fully. I'm sure that is the case now.

From my credit card T&C:
Interest Charges: Interest is charged from the date transactions are applied to your account until payment is received (unless the interest free period applies). For Cash Advances and Balance Transfers, any interest charge for the period from the previous statement to the date of full repayment will be debited the following month. Interest will not be charged on Default Charges.
Interest Free Period: Up to 56 days of Purchases if you pay your whole balance in the full and on time. No interest free period on Cash Advances or Balance Transfers.

Sooo - you will pay interest on the £1800 from the time of each transaction until it is paid off in full; the only way to avoid paying any interest on any of your purchases is to pay the bill in full on time. BUT - when you have paid e.g. £1600, from that time forward you will only be paying interest on the outstanding £200.

Does that clear it up at all for you? I'd go for borrowing it off your mum if you can, tbh - get shot of it and then don't worry about it any more. Although - on that amount, you'd probably be looking at about £30 interest tops, so it might not be worth getting in too much of a stew and just let it carry forward. Depends on how bad you feel about letting them take interest off you!