Credit Card Finance Charges

toboramai · #1 (**permalink**) 05-02-2008, 09:47 AM

I am confused on how my interest is charged on my credit cards, aren't we all?

I have a regular discover and a chase freedom card. If I pay my off my cards in full by the due date every month, I should have no finance charges, correct?

Example:
Statement amount: $200
total charges on CC: $300
Due date of bill: 25 of each month

If I paid it in full ($300) on the 24th, I would never have finance charges, correct?

Thanks in advance!

noppenbd · #2 (**permalink**) 05-02-2008, 10:04 AM

You should not even have to pay the full balance, only the statement amount before the due date. I do this every month and never pay a finance charge.

This is assuming your CC provider does not use double cycle billing. In that case if you did not pay the full bill the previous month you can get hit with interest the next month even if you pay in full!

Seeker · #3 (**permalink**) 05-02-2008, 04:35 PM

Quote:

Originally Posted by noppenbd

You should not even have to pay the full balance, only the statement amount before the due date. I do this every month and never pay a finance charge.

This is assuming your CC provider does not use double cycle billing. In that case if you did not pay the full bill the previous month you can get hit with interest the next month even if you pay in full!

Hmmm. Two different questions by the OP here:

Interest charges will be added to your total each month if you do not pay in full before the due date.

Finance charges would only accumulate if you do not pay the statement amount.... or if you transfer a balance... or do anything else that requires paperwork.

Or finance charges can also accumulate if your CC company uses either "double-cycle billing" or another method called "average daily balance."

You will need to know which "finance charge" method each of your credit card companies use, if you do not wish to pay any finance charges whatsoever. Or to avoid it altogether, pay in full each and every month (thereby also not paying any interest charges either).

Seeker · #4 (**permalink**) 05-02-2008, 04:53 PM

Quote:

Originally Posted by toboramai

I am confused on how my interest is charged on my credit cards, aren't we all?

I have a regular discover and a chase freedom card. If I pay my off my cards in full by the due date every month, I should have no finance charges, correct?

Example:
Statement amount: $200
total charges on CC: $300
Due date of bill: 25 of each month

If I paid it in full ($300) on the 24th, I would never have finance charges, correct?

Thanks in advance!

I'm still a bit confused by this.

By "statement amount" do you mean total amount charged on the statement or the statement minimum payment?

To avoid all charges, then you need to pay all charges incurred on the credit card during that statement period and anything that might not have been paid in the previous statements.
-- On the other hand, if you added another credit debt of $100 after the credit card's billing statement (not appearing on that statement), then you do not need to prepay for that $100.

Also if you pay on the 24th and they don't receive it until a few weeks later (depending on how you pay -- snail mail? direct bank transfer? etc), then you may be incurring finance charges if they also have a statement that says something like "must be received within 7 days of the due date."

Some go by the date stamped on the envelope, some don't. Some banks have a delay of three of four "business days" to process direct payments as well.

In other words, I wouldn't wait until 1 day before "due" to pay my bills; I try to do them 1 week before that due date. My bank gives me 3-4 business days warning, and there's one payment that has no direct account so they end up taking a week for that payment sometimes (they have to cut a check).

musicalbabe85 · #5 (**permalink**) 05-02-2008, 07:16 PM

From my understanding, as long as you pay the minimum due by the due date (with your Chase Freedom card you CAN pay on the due date and it gets processed that day) you won't have any finance charges. The interest however, gets charged if you don't pay your credit card balance in full each month. So like if you charge $40 on April 1st, you should pay it in full by May 1st (assuming it's the due date) in order to not get any interest.

For all you out there more knowlegdeable, please tell me if I'm wrong!

ScrimpAndSave · #6 (**permalink**) 05-02-2008, 07:35 PM

Musical babe I think you are right! At least, that is always what I understood.

safari · #7 (**permalink**) 05-02-2008, 10:09 PM

Quote:

Originally Posted by musicalbabe85

From my understanding, as long as you pay the minimum due by the due date (with your Chase Freedom card you CAN pay on the due date and it gets processed that day) you won't have any finance charges. The interest however, gets charged if you don't pay your credit card balance in full each month. So like if you charge $40 on April 1st, you should pay it in full by May 1st (assuming it's the due date) in order to not get any interest.

For all you out there more knowlegdeable, please tell me if I'm wrong!

Interest is the same as finance charges. You have to pay the statement balance in full every month to avoid finance charges.

Seeker · #8 (**permalink**) 05-03-2008, 01:02 AM

Yeah, Safari is right.

I was thinking about transaction fees (like transferring a balance over).

"Finance charges" and "interest charges" we're both being used interchangably in the OP's question. That's why I was getting confused

If you don't pay the balance in full each and every month, you will be subject to extra charges. Call them whatever you like. And companies do work out the amounts differently.... but if you don't think it's correct, you can call them and ask for an explanation.

Also as far as I know, if you pay directly to the credit card company website; that's the only way to get it credited the same day.

But I don't think most people go to each CC website to pay their bills directly... I think (and I could be wrong here too) many people use their bank's online bill pay.

I do use the online bill pay and my bank says to "allow" for 3 or 4 business days for processing... they usually don't take that long either... except for the one payment.

Stamping an envelope and sending checks, is the slowest method of payment....

I don't know which method the OP uses, but that may impact fees if the payment does not get processed in their time limit.

musicalbabe85 · #9 (**permalink**) 05-03-2008, 02:04 PM

Ah, I understand about the finance and interest charges.

I do know that if you go to Chase and pay your credit card bill the day it's due it will get credited as getting paid on that day. At least here in Indiana it does, as I get asked that at least a couple times a month as I'm processing the transaction, lol. I'm a teller for Chase.

Seeker · #10 (**permalink**) 05-03-2008, 04:43 PM

Quote:

Originally Posted by musicalbabe85

Ah, I understand about the finance and interest charges.

I do know that if you go to Chase and pay your credit card bill the day it's due it will get credited as getting paid on that day. At least here in Indiana it does, as I get asked that at least a couple times a month as I'm processing the transaction, lol. I'm a teller for Chase.

lol -- musical -- I'm not disagreeing with you. Yes, if you go to Chase bank and are paying a Chase bill it will be credited the same day. But if you go to Chase bank and pay Discover Card bill.... it's not going to credited in one day (even assuming that Chase will do that transaction for you).

If you go online to discovercard.com and pay your credit card bill from a checking account , it will also be credited the same day.

If I go to my gas company's online payment, yes it will be credited that day.

This is not a common practice though. Most people pay with Online Bill Pay (or whatever their bank calls the services).

I pay by logging into my bank and going to the pay bills section and clicking on the each account, and filling in each amount, submitting the whole, and thus a one-stop site for paying whatever bills are due at the time in 5 or so minutes maximum. I write the confirmation numbers on the envelopes (so DH knows they are paid) and done until the next stack of bills come in.

Sorry, but I get way too many bills to pay directly to each company, and so I plan to pay the bills 1 week before due and the 3-4 day turn-around time is acceptable to me.

The OP did not state anything except 1-day ahead. Depending on how he/she pays, that can be a reason for fees being added if the payment is late.

toboramai · #11 (**permalink**) 05-03-2008, 06:10 PM

Sorry for the confusion in the first post. I should not have used finance and interest charges interchangeably. I meant to say interest charges only. My goal is to pay no charges at all. I usually go to the cc website and pay the bill so it is debit that day from account.

Paying my credit cards off in full every month is not an issue for me, and I only want to ensure that I do not get slapped with any charges be it finance or interest.

ktmarvels · #12 (**permalink**) 05-03-2008, 06:56 PM

Now rember that what you've been discussing only applies to normal cc charges...if you were to get a cash advance, interest would start accruing immediately (and usually at a higher rate!)

musicalbabe85 · #13 (**permalink**) 05-03-2008, 08:49 PM

Seeker, I didn't think you were, I just didn't want people to think if they take their payment to the bank on the due date that it'd be late. And yeah, I understand what you are saying now. The payment does have to be for a card that is through Chase though, lol, can't help ya otherwise.

responduser · #14 (**permalink**) 05-06-2008, 06:45 AM

Quote:

Originally Posted by ktmarvels

Now rember that what you've been discussing only applies to normal cc charges...if you were to get a cash advance, interest would start accruing immediately (and usually at a higher rate!)

I think the interest would start after 24 hours (1 day).

Please clarify if I am wrong!

StanFatherof3 · #15 (**permalink**) 05-06-2008, 08:26 AM

I'll chime in too here and say that you won't have any interest charges as long as you pay the full statement balance before it is due. I think, though, rather than waiting until the day it is due, I would pay it a couple of business days in advance. That way, if there is an error getting posted to your account, you'll have time to correct it.

SpiderPig74 · #16 (**permalink**) 05-07-2008, 08:16 AM

That's how I understand it. As long as you pay your balance in full, at the end of each month, you will accrue no interest. If you do not though, I think that the interest in back-dated to the original date of purchase. You may want to check that out though.

Also, I found this earlier on Debt Consolidation Care, which is full of useful credit card advice. Check it out when you get chance.