# How is visa interest calculated?



## z106 (4 Sep 2008)

Given that your visa balance fluctuates throughout the month, how is the monthly interest rate on a visa card calculated?

As in - e.g. do the take the balance at the end of each business day and calculate the interest and total that up at the end of the month?
Or is it done on a weekly/monthly basis or what?


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## skrooge (5 Sep 2008)

*Re: How is visa interest clculated?*



qwertyuiop said:


> Given that your visa balance fluctuates throughout the month, how is the monthly interest rate on a visa card calculated?
> 
> As in - e.g. do the take the balance at the end of each business day and calculate the interest and total that up at the end of the month?
> Or is it done on a weekly/monthly basis or what?


 
The easiest way to think of it is interest is caluclated on each inidividual transaction daily. However, it takes effect if you fail to pay off the full amount by your payment date (i.e., within your interst free period). If you pay the full oustanding amount you don't get charged interest on your credit purchases. Cash advances are different you are charged interest from the day you withdraw the money regardless.

From Halifax site:
We will not charge interest on Purchases shown on your current statement for up to 56 days from the date of the Purchase, if you pay the total balance shown on that statement by the Payment Date (and have also paid the total balance on the previous statement by the Payment Date). Where we do charge interest on Purchases, we charge it from the date of the Transaction. We will always charge you interest on Cash Advances from the date of the Transaction and for Balance Transfers and all other amounts from the date we first charge the amount to your account...

....Interest will accrue (as well after judgment or demand as before) on a daily basis at the current variable rate advised to you and will be charged monthly to the Card account

More info @ [broken link removed]


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## z106 (5 Sep 2008)

I still don't understand.

Lets say for arguments sake i have a limit of one thousand and I have used half that limit for the first half of the month  and for the second half of the month I have used 3/4 of the limit.

Lets say the interest rate is 15%.

What will I be charged at the end of the month ?

Will it be 15% of 500/2 (as only half teh month) plus 15% of 750/2 = 37.50 + 56.25 = 93.75?

Or do they just look at my balance on a nominal day during the month and charge 15% of that balance on that dayand repeat that procedure each month? (In which case someone could pay off the balance in full teh day before this nominal day and then withdraw teh day after and avoid any interest)

Basically my general question is asklng what is the best way to pay off your visa bill to minimise interest repayments?


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## Brendan Burgess (5 Sep 2008)

Most cards have an interest free period, so the best way is to pay it off *in full* before the due date. 

The big mistake people make is that they don't pay it off in full. They have an amount due of €503 and they pay off €500. The full interest is charged on each item from the date of purchase. 

The other big mistake people make is that they pay a few days late. Again, they are charged from the date of the purchase up to the date it is paid off. With a mortgage or other loan, if you a day late, you pay 1 day's interest. With a credit card, you could be paying 57 days' interest for being a day late.

The limit is irrelevant. 

If you have not paid off your bill by the due date, the best strategy is to pay it off as quickly as possible. 

Skrooge's explanation was excellent. 

Think of it as a series of separate transactions. If you buy something today for €100, you will be charged €100@15%/365 each day, until you pay it off. 

Brendan


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## z106 (5 Sep 2008)

Ok - so what you are saying is that basically the interest I am charged is done on a daily basis and whatever my credit balance is at the end of each day, the interest charge is (credit balance * 15%/365) ?


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## Towger (5 Sep 2008)

Also, if you only pay part of your statements outstanding balance, the payment will go towards paying off the items with the lowest interest rate (for your next bill). Interest will still be calculated/changed on the full balance of the current bill. Confused? Just assume that if there is a way for the company to make money in the interest they will apply it.


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