topic Re: Interest on this amount in Credit Cards

Interest on this amount

Rackham94 — Sun, 02 Jun 2013 17:20:22 GMT

If I schedule a payment of 304.12 on a balance of 304.13 would there be any interest charges on 0.01?

Want to leave a balance so it can report.

Re: Interest on this amount

Anonymous — Sun, 02 Jun 2013 17:25:27 GMT

All you'd need to do is pay all but $1 of your account balance, let the statement cut and then pay the remaining $1. You won't have any interest unless the charges are from the previous billing cycle.

Re: Interest on this amount

LS2982 — Sun, 02 Jun 2013 17:29:49 GMT

@Anonymous wrote:
All you'd need to do is pay all but $1 of your account balance, let the statement cut and then pay the remaining $1. You won't have any interest unless the charges are from the previous billing cycle.

This is correct, I would definitely leave at least $1.

Re: Interest on this amount

HiLine — Mon, 03 Jun 2013 02:53:29 GMT

Assuming the credit card issuer doesn't cancel the bill, you'll get charged interest only if you don't pay off the 1 penny balance by the end of the grace period, assuming you have no balance carried over from the previous statement. And if you get charged interest, the amount will be about ~~0.000005 dollar per day.~~ (actually more like 15 cents per day - thanks to Walt_K for correcting me)

Don't get yourself into a debt spiral.

Re: Interest on this amount

b_seeker — Sun, 02 Jun 2013 17:55:17 GMT

@HiLine wrote:
Assuming the credit card issuer doesn't cancel the bill, you'll get charged interest only if you don't pay off the 1 penny balance by the end of the grace period, assuming you have no balance carried over from the previous statement. And if you get charged interest, the amount will be about 0.000005 dollar per day.

Don't get yourself into a debt spiral.

Note that some issuers have have a clause that states a minimum interest charged. For example, I'm pretty sure I was reading Citi's T&C and it said it is a 50 cent minimum if interest is charged.

Re: Interest on this amount

boomhower — Sun, 02 Jun 2013 19:12:35 GMT

I've noticed from my reports the CRA's tend to round down, I'd leave at least a dollar.

Re: Interest on this amount

Anonymous — Sun, 02 Jun 2013 19:29:42 GMT

And, to reinforce what the others have said in case there is a misunderstanding: the balance is reported when the statement cuts (or at the end of the month for a few issuers) so that is where you might want the $1 balance for scoring reasons. You do NOT want to leave a balance after the due date, that doesn't help with anything FICO and does incur unnecessary interest charges (albeit in this case fairly small)

As an aside, I am frequently surprised at just how much scores change with meaningless small report differences. My EQ was 747 May 11, 772 today, the only difference (apart from 3 weeks of time) being that I have 5 balances reporting the first time, total utilization 0.2%, and now just one, with a total utilization of 0.01% Does that REALLY make me a better risk!

Re: Interest on this amount

SnackTrader — Mon, 03 Jun 2013 01:08:54 GMT

+1 Let a balance report but pay in full before the due date.

Re: Interest on this amount

Simply827 — Mon, 03 Jun 2013 02:03:19 GMT

This is slightly off topic but still related.

How do I avoid paying interest? Must I pay the statement balance or the current balance?

For instance..I paid statement balance of $200. I make another $100 of purchases before statement cuts. Do I owe interest on the $100 or am I good as long as I pay it off by the next due date. In order to avoid interest, do I have to pay at least the statement balance of $200 or must I PIF the $300?

Re: Interest on this amount

Anonymous — Mon, 03 Jun 2013 02:08:15 GMT

@Simply827 wrote:
This is slightly off topic but still related.

How do I avoid paying interest? Must I pay the statement balance or the current balance?

For instance..I paid statement balance of $200. I make another $100 of purchases before statement cuts. Do I owe interest on the $100 or am I good as long as I pay it off by the next due date. In order to avoid interest, do I have to pay at least the statement balance of $200 or must I PIF the $300?

For most cases, statement balance.

However, refer to your card T&C. Different lenders & cards have different grace periods, which can range from 0 to 45 days.

For cards that have no grace period (i.e. Premier One), you owe interests starting from the day that charge is posted.

Re: Interest on this amount

b_seeker — Mon, 03 Jun 2013 02:11:03 GMT

@Simply827 wrote:
This is slightly off topic but still related.

How do I avoid paying interest? Must I pay the statement balance or the current balance?

For instance..I paid statement balance of $200. I make another $100 of purchases before statement cuts. Do I owe interest on the $100 or am I good as long as I pay it off by the next due date. In order to avoid interest, do I have to pay at least the statement balance of $200 or must I PIF the $300?

What ever amount appears on your statement will collect interest if not PIF, to make it as simple as possible.

Usually all pending charges (Depending on when they were made) clear for the statement cut, so likely you'd end up paying $300 in that case.

Edit: Beaten to the punch. (Also I forgot about garbage tier lenders like charge interest immediately)

Re: Interest on this amount

HiLine — Mon, 03 Jun 2013 02:21:47 GMT

@Simply827 wrote:
This is slightly off topic but still related.

How do I avoid paying interest? Must I pay the statement balance or the current balance?

For instance..I paid statement balance of $200. I make another $100 of purchases before statement cuts. Do I owe interest on the $100 or am I good as long as I pay it off by the next due date. In order to avoid interest, do I have to pay at least the statement balance of $200 or must I PIF the $300?

To not pay interest, you have to pay the statement balance in full before the grace period expires, and not use cash advance.

If you are curious about the way interest is assessed, feel free to check out my blog post: http://hiepsfinance.com/2013/06/02/why-is-your-credit-card-bill-so-huge-how-credit-card-interest-is-calculated-and-what-grace-period-means/

Re: Interest on this amount

HiLine — Mon, 03 Jun 2013 02:23:19 GMT

@b_seeker wrote:
(Also I forgot about garbage tier lenders like charge interest immediately)

You must be referring to First Premier

Re: Interest on this amount

Simply827 — Mon, 03 Jun 2013 02:38:42 GMT

Thanks for the replies. It's a PP Ex MC.

The T&C does say "Your due date is at least 23 days after the close of each billing cycle. We will not charge you any interest on purchases if you pay your entire balance by the due date each month."

To me that sounds like current balance, but it could be statement balance, who knows?

ETA: I read through another section and the wording appears to refer to the statement balance being paid in full.

Re: Interest on this amount

Walt_K — Mon, 03 Jun 2013 02:41:19 GMT

@HiLine wrote:
Assuming the credit card issuer doesn't cancel the bill, you'll get charged interest only if you don't pay off the 1 penny balance by the end of the grace period, assuming you have no balance carried over from the previous statement. And if you get charged interest, the amount will be about 0.000005 dollar per day.

Don't get yourself into a debt spiral.

I think you're getting this assuming the interest on a $0.01 balance. That's not typically how it works. If you PIF by the due date, then there is no interest. However, it is kind of an all or nothing thing. If you fail to PIF, you get charged interest and then you have to look at how they charge interest. IIRC it isn't against your remaining balance, i.e., $0.01, but the average daily balance or something like that. So leaving a penny could end up costing you quite a bit.

Re: Interest on this amount

HiLine — Mon, 03 Jun 2013 02:51:06 GMT

You're absolutely right. I don't know why I wrote that.

The interest would be assessed on the average daily balance, not on just the unpaid amount. So yes, leaving 1 penny unpaid can result in an unexpectedly large interest charge. Assuming the an average daily balance of $300, the interest amount would be around 15 cents a day, not a fraction of a penny like I had said earlier.

Re: Interest on this amount

indiolatino61 — Mon, 03 Jun 2013 06:31:57 GMT

@Rackham94 wrote:
If I schedule a payment of 304.12 on a balance of 304.13 would there be any interest charges on 0.01?

Want to leave a balance so it can report.

I've been told that if the balance is less than $1, that many CCC will report $0. Also, for FICO score purposes, FICO will not credit usage for less than 0.5%, as it rounds off. So 1-cent will not help your utilization score since it will be seen as zero and not 1%.