Avoiding Interest

[JoshuaHeckathorn]

My first post ever. Hi!

This caught my eye, and in fact is the reason I registered on this site (just discovered it tonight and was browsing...). Every time I've EVER paid off a credit card I get a statement the following month with trailing interest. I've called about it before and have been told that there is a lag, and indeed, the interest is due. This has happened with Chase, WaMu, B of A....am I missing something????

This issue only arises for cardholders that carry balances, so be sure to always pay your credit cards in full each month and you won't have to deal with this. Anyway, residual or "trailing" interest is what credit issuers charge between when your statement is issued and when you actually pay your bill. If you want a true payoff amount, you'll need to call them and find out exactly how much it will cost to pay off your balance on the date you expect payment to go through. If you just pay the amount due shown on your statement, chances are you're going to get hit with some residual interest.

[GrimJack]

check out nerdwallet - it is actually kind of fun to play with

[chrissy47454]

I have a capitalone card. I ran a balance for several months and then I paid it off in full last month (statement balance). I was charged for interest on the next bill. I called capitalone and they credited back the interest charge. It is the second time this mistake has been made by capitalone, makes me wonder if they do it on purpose ho9ping the customer wont notice or is ignorant to their policies.

My first post ever. Hi!

This caught my eye, and in fact is the reason I registered on this site (just discovered it tonight and was browsing...). Every time I've EVER paid off a credit card I get a statement the following month with trailing interest. I've called about it before and have been told that there is a lag, and indeed, the interest is due. This has happened with Chase, WaMu, B of A....am I missing something????

[jpg7n16]

are you thinking of "minimum payment"?

The OP sounds like he/she is asking about the statement balance (for the previous month) versus the current balance.

Yes I was. I misunderstood the question. Oops!

[JoshuaHeckathorn]

Incorrect.

They do not charge you interest on charges made after the closing date as long as you pay them when they come on the next statement, of course. We aren't talking about "minimum payments," of course. It's pretty clear what a "minimum payment" is.

For example: Lets say I charged $500 from the 16th of May to the 15th of June. The cc company waits a few days to make sure everything gets recorded and then sends me my bill on the 20th or so. My bill has a statement balance of $500. But if I charged $100 on the 16th, my total balance will be $600. I do NOT have to pay $600, I only have to pay $500. The $100 I charged on the 16th will show up on July's statement and it will NOT be charged interest.

There is NO reason to pay an extra $100 30 days before it is due. That money stays in your account earning about 8 cents of interest. You pay it in July when they ask for it.

I have been paying statement balances for 17 years and never paid a penny in interest. There is no good reason to pay money before you have to when it could be doing something else more useful elsewhere.

Well said Badger. Pay the statement balance in full and on time every month and you'll never pay a cent in interest.

[BuckyBadger]

Because of the two of them, whichever is bigger is the one that describes how much debt you actually have out there.

They don't charge you interest on your payment, they charge on your whole balance.


Either way, the more you pay, the faster the debt goes away, so when in doubt between two balances owed shown on the statement - just pay the larger balance.

Incorrect.

They do not charge you interest on charges made after the closing date as long as you pay them when they come on the next statement, of course. We aren't talking about "minimum payments," of course. It's pretty clear what a "minimum payment" is.

For example: Lets say I charged $500 from the 16th of May to the 15th of June. The cc company waits a few days to make sure everything gets recorded and then sends me my bill on the 20th or so. My bill has a statement balance of $500. But if I charged $100 on the 16th, my total balance will be $600. I do NOT have to pay $600, I only have to pay $500. The $100 I charged on the 16th will show up on July's statement and it will NOT be charged interest.

There is NO reason to pay an extra $100 30 days before it is due. That money stays in your account earning about 8 cents of interest. You pay it in July when they ask for it.

I have been paying statement balances for 17 years and never paid a penny in interest. There is no good reason to pay money before you have to when it could be doing something else more useful elsewhere.

[GREENBACK]

There should be an "amount due" posted on the statement that should be easy to seperate from the total acount balance. I honestly do think banks make this mildly confusing to get people to send in a little extra before it's really due.

[disneysteve]

They don't charge you interest on your payment, they charge on your whole balance.

The OP sounds like he/she is asking about the statement balance (for the previous month) versus the current balance.

As long as they have been current each month, the statement balance is all that is needed to pay, no interest has been charged on the additional purchases.

HOWEVER, if they have only payed the minimum and a balance has carried over, then yes you are correct and interest is being charged on more than just the statement balance.

greenskeeper is correct. If you have no outstanding balance, you will not pay interest if you pay the statement balance in full every month. It is not necessary to pay charges posted after the statement date.

[greenskeeper]

Because of the two of them, whichever is bigger is the one that describes how much debt you actually have out there.

They don't charge you interest on your payment, they charge on your whole balance.


Either way, the more you pay, the faster the debt goes away, so when in doubt between two balances owed shown on the statement - just pay the larger balance.

are you thinking of "minimum payment"?

The OP sounds like he/she is asking about the statement balance (for the previous month) versus the current balance.

As long as they have been current each month, the statement balance is all that is needed to pay, no interest has been charged on the additional purchases.

HOWEVER, if they have only payed the minimum and a balance has carried over, then yes you are correct and interest is being charged on more than just the statement balance.

[jpg7n16]

Why? What is your reasoning behind this?

Because of the two of them, whichever is bigger is the one that describes how much debt you actually have out there.

They don't charge you interest on your payment, they charge on your whole balance.


Either way, the more you pay, the faster the debt goes away, so when in doubt between two balances owed shown on the statement - just pay the larger balance.

[shanecurran]

Realistically, that's not a possibility. It's fairly difficult for a large company to isolate and target specific individuals for pretty much anything, let alone attempt to cheat them and get away with it without alerting regulators, watchdog groups, and large groups of interconnected customers (hello Google!).

Likewise, because it's such a large company, it's fairly simple for processing errors (on the part of random individual employees) to occur. And when you serve a few hundred thousand customers, even just a .1% error rate (most companies will be well above that) is still a fairly large number of mistakes.

I wasn't implying that they targeted me specifically but possibly that it is a glitch in the system that they have conveniently ignored.

[kork13]

I have a capitalone card. I ran a balance for several months and then I paid it off in full last month (statement balance). I was charged for interest on the next bill. I called capitalone and they credited back the interest charge. It is the second time this mistake has been made by capitalone, makes me wonder if they do it on purpose ho9ping the customer wont notice or is ignorant to their policies.

Realistically, that's not a possibility. It's fairly difficult for a large company to isolate and target specific individuals for pretty much anything, let alone attempt to cheat them and get away with it without alerting regulators, watchdog groups, and large groups of interconnected customers (hello Google!).

Likewise, because it's such a large company, it's fairly simple for processing errors (on the part of random individual employees) to occur. And when you serve a few hundred thousand customers, even just a .1% error rate (most companies will be well above that) is still a fairly large number of mistakes.

[shanecurran]

I have a capitalone card. I ran a balance for several months and then I paid it off in full last month (statement balance). I was charged for interest on the next bill. I called capitalone and they credited back the interest charge. It is the second time this mistake has been made by capitalone, makes me wonder if they do it on purpose ho9ping the customer wont notice or is ignorant to their policies.

[BuckyBadger]

Just pay the statement balance and you will never pay any interest. Anyone who tells you otherwise is misinformed. There is no need to give the CC company money any earlier than you have to.

[disneysteve]

If there is a delay of 30 days until the next statement, wouldn't I pay 5 days of interest on that purchase? Or is the grace period from the day the statement is issued? I may just call the company and see if they can explain.

No. The grace period is from the billing date, not from the transaction date. That's where you are getting confused. You need only pay the amount of the bill, not any amount charged after the billing date. That will be taken care of on the next bill. As long as you pay the full statement balance of each bill every month, you won't pay a penny in interest charges.