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how interest works

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how interest works

Okay so just a quick question about interest. So my discover card balance at the last statement from last week was 313 but my balance now is around 600. I have until the due date to pay the 313 and if I don't I get charged interest on only that right? It wouldn't be the full 600? I'll be paying it though. I'd feel like all this cash back is a waste paying so much interest.
Like I bought groceries on it yesterday so I have until the statement cuts again then the due date until I get charged interest on that right? Its pretty simple I guess its just easy to mix everything up.
Message 1 of 9
8 REPLIES 8
Valued Contributor

Re: how interest works

Always pay the statement balance in full, no interest (as long as you have a grace period card). I like to use cards after closing, then ride for the additional time past the next statement cut, if I choose.

 

Edit: If you've already fallen into the carrying balance thing, you're literally going to have to zero the card out to take advantage of the system, which could take an additional few statements.

Message 2 of 9
Established Contributor

Re: how interest works

Most cards calculate interest on the average daily balance. You usually have no grace period if you did not PIF the previous statement. So yes you could in fact be paying interest on part of that $600 and not just the statement balance. Read your card holder agreement.

 

To to clarify you will not be charge interest this month but if you do not PIF the statement balance then new purchases in the future have no grace period and are subject to interest right away. 

Message 3 of 9
Established Contributor

Re: how interest works

Pretty certain the below example is accurate and should help you:

 

nov 30--statement cuts at 313

dec 5--you chage another 200

dec 22--at due date you pay the min of 31. ]

Dec 30 statement cuts charging you interest on the 282 (313-31) for 30 days, and interest on the 200 for 25 days

 

 

Message 4 of 9
Established Contributor

Re: how interest works


@compassion101 wrote:

Pretty certain the below example is accurate and should help you:

 

nov 30--statement cuts at 313

dec 5--you chage another 200

dec 22--at due date you pay the min of 31. ]

Dec 30 statement cuts charging you interest on the 282 (313-31) for 30 days, and interest on the 200 for 25 days

 

 


That has always been my understanding. As long as you pay in full every statement the cash back will be worth it.

Over $200,000 in credit across 12 cards.

FICO ranges from 791 -824 as of 07/26/2019
Message 5 of 9
Contributor

Re: how interest works

Lame. So if there has to be a zero balance in between so I don't get charged. I'm not exactly floating a balance just using it. I spend 100 on it and pay it a week later. But in that time I spent another 200 between the time I spent the 100 and paid the 100 but I'm gonna pay that the week after. So I'd be charged interest on the 200? And even possibly the 100? I'd hate to have to wait to be at 0 completely to start spending on the card again.
Message 6 of 9
Established Contributor

Re: how interest works

You are misunderstanding. There does not have to be a zero balance. You only need to pay the statement balance in full each month to avoid any and all interest. If you fail to do this however you will not just pay interest on the leftover balance but also on new charges they you made because there is no longer a grace period.
Message 7 of 9
Contributor

Re: how interest works


@Chris679 wrote:
You are misunderstanding. There does not have to be a zero balance. You only need to pay the statement balance in full each month to avoid any and all interest. If you fail to do this however you will not just pay interest on the leftover balance but also on new charges they you made because there is no longer a grace period.

Okay. Thanks for explaining. I did understand but for some reason your comment actually threw me. I just didn't read it correctly. Well good to know. I'm paying the statement balance next week so I'll be good 

Message 8 of 9

Re: how interest works

If you're ever interested to know how to calculate amount of interest you have to pay: {Link removed - MarineVietVet, myFICO moderator}

Amex TrueEarning: $18k | Amex BlueSky: $15k | BofA BetterBalance: $12k | BofA Cash Rewards: $7k | Chase Freedom: $15k | Chase Slate: $300 | CapitalOne QuickSilver: $10k | Target: $2.5k | Total CL: $79,800 | TU: 789
Message 9 of 9
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