Credit card interest

[Aharon]

Hi

Please could someone explain to me how credit card interest is calculated. For example if the credit card advertises up to 55 days interest free or 62 days interest free, when does interest start being calculated.

Let's make the assumptions of a statement date of last day of the month and debit order / instalment date on the card of 20th of the next month.

Thanks so much

 

[diapason]

Interest starts from the day of purchase unless you pay the account in full by due date

 

[Goosfrabba]

Up to 55 days interest free credit includes the 30 days the statement is only + the 25 days you have to pay the balance when the statement closes

 

[mr_norris]

I also think that the 55 days thing only counts if you are able to pay the minimum payment by the due date. Sometimes I've been a day or two late with payments and FNB nailed me the full interest charge.

 

[Aharon]

I believe you have to pay the FULL o/s balance by the "due date" but...

What defines the due date?
Does it include payments made in the current month?

Thanks

 

[supersunbird]

What defines the due date?

The due date is always clearly stated on the statement.

 

[Goosfrabba]

I believe you have to pay the FULL o/s balance by the "due date" but...

What defines the due date?
Does it include payments made in the current month?

Thanks

when your statement closes, the balance at that time needs to be paid in full by the due date (also on the statement) to avoid interest. Even one day late will incur interest

 

[Aharon]

when your statement closes, the balance at that time needs to be paid in full by the due date (also on the statement) to avoid interest. Even one day late will incur interest

So lets say my statement closes 30 November owing R5000 and the statement due date is 20 December, you are saying that on or before 20 December I must pay in R5000, irrespective of whether by this date, my balance is maybe R20000 due?Then by 20 January I must pay in R15,000 etc?

 

[Goosfrabba]

So lets say my statement closes 30 November owing R5000 and the statement due date is 20 December, you are saying that on or before 20 December I must pay in R5000, irrespective of whether by this date, my balance is maybe R20000 due?Then by 20 January I must pay in R15,000 etc?

Correct. If your statement closes with a balance of R5000, that is what you must pay. If you spend an extra R15000 in the meantime, that will only count towards the next cycles due date

 

[Aharon]

Correct. If your statement closes with a balance of R5000, that is what you must pay. If you spend an extra R15000 in the meantime, that will only count towards the next cycles due date

Cool thank you. I assume I would be on the hook for credit life, if linked to my card from date of spend?

 

[Aharon]

when your statement closes, the balance at that time needs to be paid in full by the due date (also on the statement) to avoid interest. Even one day late will incur interest

Sorry to go on... Let's say on due date I pay the minimum due - let's call it R250. I am then charged interest on...? The R4750? What if I then settle the R4750 on the 25th of the month for example? Will the interest then stop at this date again and the additional R15, 000 I spent will only incur interest from the next due date?

Thanks again

 

[Koosvanwyk]

Sorry to go on... Let's say on due date I pay the minimum due - let's call it R250. I am then charged interest on...? The R4750? What if I then settle the R4750 on the 25th of the month for example? Will the interest then stop at this date again and the additional R15, 000 I spent will only incur interest from the next due date?

Thanks again

It's really simple, you must pay the FULL balance by the due date otherwise interest is charged from the date of purchase.

So if you balance is R50,000 due to the bank at 30 Nov (your statement date) and the due date is 25 Dec and you pay R49,999 on 25 Dec you will pay interest on the full R50,000 starting from the date of purchase (as the R49,999 is not the full balance of R50,000).

So in my example, lets say you only made 1 purchase that made up the R50,000 on (by example) 2 Nov, you will pay interest on the R50,000 from 2 Nov up to 25 Dec and then from 25 Dec you will pay interest on the R1 outstanding.

This is only for purchases, this does not apply to cash withdrawals etc from the CC account.

Also, it is "up to" 55 days and not exactly 55 days. If you made the purchase a day before your statement date then you only get 26 days interest free.

 

[Aharon]

It's really simple, you must pay the FULL balance by the due date otherwise interest is charged from the date of purchase.

So if you balance is R50,000 due to the bank at 30 Nov (your statement date) and the due date is 25 Dec and you pay R49,999 on 25 Dec you will pay interest on the full R50,000 starting from the date of purchase (as the R49,999 is not the full balance of R50,000).

So in my example, lets say you only made 1 purchase that made up the R50,000 on (by example) 2 Nov, you will pay interest on the R50,000 from 2 Nov up to 25 Dec and then from 25 Dec you will pay interest on the R1 outstanding.

This is only for purchases, this does not apply to cash withdrawals etc from the CC account.

Also, it is "up to" 55 days and not exactly 55 days. If you made the purchase a day before your statement date then you only get 26 days interest free.

So basically even if, in your example I transferred in 5 amounts of R10, 000 before the due date this would work to stop interest being charged?

 

[supersunbird]

It's really simple, you must pay the FULL balance by the due date otherwise interest is charged from the date of purchase.

So if you balance is R50,000 due to the bank at 30 Nov (your statement date) and the due date is 25 Dec and you pay R49,999 on 25 Dec you will pay interest on the full R50,000 starting from the date of purchase (as the R49,999 is not the full balance of R50,000).

So in my example, lets say you only made 1 purchase that made up the R50,000 on (by example) 2 Nov, you will pay interest on the R50,000 from 2 Nov up to 25 Dec and then from 25 Dec you will pay interest on the R1 outstanding.

This is only for purchases, this does not apply to cash withdrawals etc from the CC account.

Also, it is "up to" 55 days and not exactly 55 days. If you made the purchase a day before your statement date then you only get 26 days interest free.

They will charge you interest on the R1.