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The exact moment of the start and stop of the interest accrual

Paranoid
Contributor

The exact moment of the start and stop of the interest accrual

I have a question. I have been using credit cards for more than three years, and always paid in full the balance of the statement, never paying interest. I wanted to figure out what would happen if I did not pay the full balance of the statement by the due date.

 

If I’ve always paid earlier and had grace period active, at some point I don’t pay the last bill in full by the due date, from what exact moment does the interest begin to accrue? From that exact payment due date? Or from the first day of the current billing cycle?

 

And the second question - having lost the grace period, and having a situation with interest accrual. What is the necessary condition for interest to cease to accrue? If at some point I pay the last bill in full before the due date, from that exact moment when CCC receives the payment, the interest ceases to accrue?

BoA CR (2), CITI DC, Chase FF, AmEx BCE, Discover It, UMB SR, USB C+, CO WMT, Synch TJX, TD TGT, CITI CC
Message 1 of 12
11 REPLIES 11
Aim_High
Senior Contributor

Re: The exact moment of the start and stop of the interest accrual


@Paranoid wrote:

I have a question. I have been using credit cards for more than three years, and always paid in full the balance of the statement, never paying interest. I wanted to figure out what would happen if I did not pay the full balance of the statement by the due date.

 

If I’ve always paid earlier and had grace period active, at some point I don’t pay the last bill in full by the due date, from what exact moment does the interest begin to accrue? From that exact payment due date? Or from the first day of the current billing cycle?

 

And the second question - having lost the grace period, and having a situation with interest accrual. What is the necessary condition for interest to cease to accrue? If at some point I pay the last bill in full before the due date, from that exact moment when CCC receives the payment, the interest ceases to accrue?


Read the fine print of your credit card agreements since they can have exceptions to billing policies.

 

Generally speaking, if you PIF on or before your "Due Date", you pay no interest.

 

Interest begins to accrue the day after your due date normally.  (But the bank may say they must receive your payment by a certain time to post the same day.  So maybe after 8 p.m., for example, you'll be paying "late".)

 

Interest should stop accruing the day your payment is posted to pay off your outstanding balance. 

 

The "billing cycle" dates are separate from when interest stops and starts.

 

If you want to calculate how much interest you are paying, divide the annual APR % by 12 to get a monthly rate. 

So for example 21.00% expressed as 0.21 / 12 = 0.0175 on a monthly basis.

If your balance is $1000 and you carry it the full month, you would pay $17.50 per month in interest.

If you pay it off mid-month, prorate the charges by approximate number of days. 

 

 

 



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Message 2 of 12
Paranoid
Contributor

Re: The exact moment of the start and stop of the interest accrual


@Aim_High wrote:

Interest should stop accruing the day your payment is posted to pay off your outstanding balance. 


You mean it stops accruing only after paying off to zero? What happens if I just start to pay not to zero, but the statement balance only and thus, the account never comes to $0?

BoA CR (2), CITI DC, Chase FF, AmEx BCE, Discover It, UMB SR, USB C+, CO WMT, Synch TJX, TD TGT, CITI CC
Message 3 of 12
AverageJoesCredit
Mega Contributor

Re: The exact moment of the start and stop of the interest accrual

I thought this thread would be about the exact moment of the start and stop of the internetSmiley Wink
Message 4 of 12
NRB525
Super Contributor

Re: The exact moment of the start and stop of the interest accrual

We went through this in excruciating detail in your other thread.

Let the balance post and find out. If you still have the question after the last thread, you need to experience it to understand it. The amounts of interest expense will not be significant. The learning will be priceless.
High Bal Jan 2009 $116k on $146k limits 80% Util.
Oct 2014 $46k on $127k 36% util EQ 722 TU 727 EX 727
April 2018 $18k on $344k 5% util EQ 806 TU 810 EX 812
Jan 2019 $7.6k on $360k EQ 832 TU 839 EX 831
March 2021 $33k on $312k EQ 796 TU 798 EX 801
May 2021 Paid all Installments and Mortgages, one new Mortgage EQ 761 TY 774 EX 777
Message 5 of 12
Paranoid
Contributor

Re: The exact moment of the start and stop of the interest accrual


@NRB525 wrote:
We went through this in excruciating detail in your other thread.

I do not agree. I have a simple question, and there is no answer for it in my other thread:

 

@Paranoid wrote:
What happens if I just start to pay not to zero, but the statement balance only and thus, the account never comes to $0?
BoA CR (2), CITI DC, Chase FF, AmEx BCE, Discover It, UMB SR, USB C+, CO WMT, Synch TJX, TD TGT, CITI CC
Message 6 of 12
AverageJoesCredit
Mega Contributor

Re: The exact moment of the start and stop of the interest accrual

If you dont pay the full balance of your statement after having previously always pif, you will see interest on the next bill, unless you are still on 0% apr promo. To stop any further interest pay your next bill and full and any interest. Then let you r next statement come in at zero and you should be good.
Message 7 of 12
NRB525
Super Contributor

Re: The exact moment of the start and stop of the interest accrual

It is the same answer as when your promotion interest rate ends. The existing balance, and any futures charges added to the card are charged / calculated for daily interest.

It has already been explained but because you don’t have the context of experience, it is not registering for you.

Thus, you need to let a balance post to experience the interest cost. It is not painful.
High Bal Jan 2009 $116k on $146k limits 80% Util.
Oct 2014 $46k on $127k 36% util EQ 722 TU 727 EX 727
April 2018 $18k on $344k 5% util EQ 806 TU 810 EX 812
Jan 2019 $7.6k on $360k EQ 832 TU 839 EX 831
March 2021 $33k on $312k EQ 796 TU 798 EX 801
May 2021 Paid all Installments and Mortgages, one new Mortgage EQ 761 TY 774 EX 777
Message 8 of 12
FinStar
Moderator

Re: The exact moment of the start and stop of the interest accrual

As mentioned above by AJC, and by @NRB525 in your separate thread, any trailing interest from any previous unpaid cycle + current transactions will continue to revolve and be part of the average daily balance calculation.

To reset everything back to $0, you'd need to PIF everything + any remaining trailing interest as applicable. Once those 2 conditions are met then the account will become whole again. So, if you are looking to avoid any additional interest, just PIF.
Message 9 of 12
Paranoid
Contributor

Re: The exact moment of the start and stop of the interest accrual


@FinStar wrote:
To reset everything back to $0, you'd need to PIF everything + any remaining trailing interest as applicable. Once those 2 conditions are met then the account will become whole again. So, if you are looking to avoid any additional interest, just PIF.

So, based on your words, that if I start to pay ONLY the STATEMENT amount before due date every month (as it should be normally) and never pay the full actual balance to zero, I will never regain the grace period back and will pay interest forever? Is that correct?

BoA CR (2), CITI DC, Chase FF, AmEx BCE, Discover It, UMB SR, USB C+, CO WMT, Synch TJX, TD TGT, CITI CC
Message 10 of 12
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