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So I recently paid off some cards. I know that when the statements cut I will have some trailing interest that accrued before payoff. I think I understand how this works but my question is once I pay off that interest can I then charge against the card immediately without accruing new interest or do I need to wait for the next statement to cut?
Example: Capital One statement cuts on the 30th, trailing interest is paid on the 1st, I charge the card on the 5th.
Under this scenario no interest will be accrued when the next statement cuts?
@sportsguy83 wrote:So I recently paid off some cards. I know that when the statements cut I will have some trailing interest that accrued before payoff. I think I understand how this works but my question is once I pay off that interest can I then charge against the card immediately without accruing new interest or do I need to wait for the next statement to cut?
Example: Capital One statement cuts on the 30th, trailing interest is paid on the 1st, I charge the card on the 5th.
Under this scenario no interest will be accrued when the next statement cuts?
That should be generally true, @sportsguy83 with a couple of caveats. I'm assuming that in that scenario that the card was paid off two months ago and the trailing interest is the only new charge?
But yes, if you pay off the entire accumulated trailing interest, you should be okay to use that card under most circumstances while avoiding additional interest charges.
Thanks for the all the very detailed informatioin @Aim_High! I think to be safe I'll use another card until the statement cuts.
@Aim_High wrote:
I'm assuming that in that scenario that the card was paid off two months ago and the trailing interest is the only new charge?
The card was paid off on the 22nd. Using the Cap1 example again, when the statement cuts on the 30th the only new charges will be the acrued interest from the 1st to 22nd.
@sportsguy83 wrote:Thanks for the all the very detailed informatioin @Aim_High! I think to be safe I'll use another card until the statement cuts.
@Aim_High wrote:
I'm assuming that in that scenario that the card was paid off two months ago and the trailing interest is the only new charge?The card was paid off on the 22nd. Using the Cap1 example again, when the statement cuts on the 30th the only new charges will be the acrued interest from the 1st to 22nd.
That's correct. This is where, though, that the payoff amount and resetting your grace period may vary somewhat based on the balance, payments, interest, and lender's policies. Yes, you're charged interest from the 1st to the 22nd. With most lenders in this situation, your new trailing interest would be posted to your account eight days later on the statement cut date but that debt still exists in between; it's just not showing on the website yet. The general guidance at the Consumer Finance Protection Bureau is that "If you pay in full some months, and not in other months, you may lose your grace period for the month that you don’t pay in full and for the month after." (But the exact calculations depend on the lender's disclosures.)
I looked at Capital One's website and they state the following about their grace periods:
As long as you’ve paid your previous balance in full by the due date each month, the grace period for Capital One consumer credit cards includes both:
In this case, it sounds like if you paid the total amount due on the 22nd, then made one additional payment of the total amount of trailing interest due on the 1st, that would reset your grace period with them for using the card the following month. However, as the CFPB website states, it's safer to assume you may have lost the grace period for 30 days after paying off a card to avoid any surprises. That's why we usually recommend this since lender practices may vary.
Some lenders might charge the trailing interest from the 1st to the 22nd and then also add additional interest on your statement balance on the 30th to include the daily interest due from the 23rd to the 30th on that trailing interest you owe them. And then would continue to charge daily interest until you pay off the total due. This is why I suggested its a safe idea to call the lender and ask for an exact payoff amount as-of a particular date before you make a payment.
With Capitol One, my experience was that if I paid the balance to zero prior to the payment due date, I had zero trailing interest in that next statement that printed. I regularly moved $500 to this card, with a 10.9% fixed APR, saw no interest cost in the first month, interest cost in the second month as there was a second month of balance remaining, and no interest in the third and final month because I had paid it to zero that month.
Fun fact: these regular BT's ( up to four cycles per year ) we're not enough to prevent the CLD from a $10k limit to a $5k limit in 2020. Card is now closed by user.