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Credit Card Interest

The following is an attempt to simplify the description of how interest is calculated on a typical credit card. The precise details of how your bank does so may differ from this. It is important to know that there is no specific legislation on how interest should be applied.

If the outstanding balance as shown on a statement is paid in full before the due date shown on that statement, then no further interest will be charged on that amount. This is so, regardless of whether further purchases have been made which are not yet shown on the statement.

If the outstanding balance as shown on a statement is not paid in full before the due date shown on that statement, then interest will be calculated on a daily basis at 1/365 of the annual rate on all balances from either:-

  • the date of the previous statement or
  • the date of purchase
  • to the later of
  • the date on which any repayments are credited
  • the date of that statement

No interest will be applied to cash withdrawals if the amount is paid in full by the statement date (of course a withdrawal fee will have been applied on the day of withdrawal). However, if the balance is not paid in full, interest will be charged from the date of withdrawal, in addition to the withdrawal fee.

The interest rate on credit card finance is normally the highest interest rate of all forms of bank credit. Our message is - Avoid paying credit card interest if you can at all; and make sure that you don't accidentally leave a small balance outstanding.