Do you know how your credit card works?

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Forums › Finance and wealth management › Do you know how your credit card works?

GeoffisPure

459 posts

Ultimate Geek

#107051 6-Aug-2012 12:45

I was always of the belief that when you made a purchase on your credit, the first 55 days were interest free.

Not that simple, apparently. The first 55 days are only interest free if you pay the entire card balance in full. If you make a purchase, and you haven't paid your card balance in full within 55 days, interest is calculated on that purchase from day 1.

The more you know.

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#668236 6-Aug-2012 12:53

yep, I got caught out with this once. never again.
also, it is only 'up to' 55 days too since this depends on when in the billing cycle you make your purchase.

You might get billed every 30 days and then have 25 days to pay that bill. so if you make a purchase on the first day of the cycle it gives you 55 days interest free, but if you make one on the 30th day of the cycle, then you only have 25 days interest free.

sbiddle

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Biddle Corp

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#668264 6-Aug-2012 13:23

The number of days for interest free purchases depends entirely on the credit card type and the billing cycle. With most cards it's either 44 or 55 days.

As for interest if you pay your card on time you won't pay interest. If you don't pay it off in full then interest will start accruing from the date goods were purchased.

tardtasticx

3075 posts

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#668280 6-Aug-2012 13:45

Must admit, had a little heart attack right now. Maxed tertiary credit card, 19.45% interest. Planned to pay off slowly. Guess that isn't happening now.

dolsen

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#668295 6-Aug-2012 13:54

tardtasticx: Must admit, had a little heart attack right now. Maxed tertiary credit card, 19.45% interest. Planned to pay off slowly. Guess that isn't happening now.

Not sure of the back story of this however have you thought about a balance transfer to a different banks credit card with a low interest rate for 6 months?

ajobbins

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#668305 6-Aug-2012 13:59

As sbiddle said, it also depends when in the cycle the transaction is made.

You may have between 14-25 days after the statement is issues of interest free time.

So, if you make a transaction on the first day into your billing cycle, you will have the full interest free period (Say 44 days) on that transaction.

If you make a transaction on the last day before your statement is calculated, you will have say 14 days 'interest free' on that transaction.

This is worked on on the individual transaction date, so if you don't pay the card off in full, any balance rolled over has no interest free period at all. You will however get your interest free period on the new transactions within that period.

It also pays to check how your card issuer applies payments to your card.

Some types of transaction (such as cash advances) don't qualify for any interest free period, and your bank may apply any payments you make to the card to purchases before cash advances to maximise the interest you pay.

Some (I'm not sure) may also apply payments to newest transactions first - however I don't think this happens

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tardtasticx

3075 posts

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#668308 6-Aug-2012 14:00

dolsen:
tardtasticx: Must admit, had a little heart attack right now. Maxed tertiary credit card, 19.45% interest. Planned to pay off slowly. Guess that isn't happening now.

Not sure of the back story of this however have you thought about a balance transfer to a different banks credit card with a low interest rate for 6 months?

I'm seriously considering doing this, but I'm not quite sure if they will give me a credit card, considering I'm only 18. But I already have an overdraft and credit card with ASB in their tertiary package, and am on account with Vodafone, I got a $500 card because I knew I'd go crazy otherwise and I'm glad I did that too.
Which bank is best for that do you think? Its not much I know but its a lot when you're a student lol.

bazzer

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#668310 6-Aug-2012 14:02

Pretty sure it's the same deal with most of the deferred payment arrangements. If you don't pay it off fully at the end of the deferred payment term you get charged interest from the start.

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John2010

532 posts

Ultimate Geek

#668323 6-Aug-2012 14:15

tardtasticx:
dolsen:
tardtasticx: Must admit, had a little heart attack right now. Maxed tertiary credit card, 19.45% interest. Planned to pay off slowly. Guess that isn't happening now.

Not sure of the back story of this however have you thought about a balance transfer to a different banks credit card with a low interest rate for 6 months?

I'm seriously considering doing this, but I'm not quite sure if they will give me a credit card, considering I'm only 18. But I already have an overdraft and credit card with ASB in their tertiary package, and am on account with Vodafone, I got a $500 card because I knew I'd go crazy otherwise and I'm glad I did that too.
Which bank is best for that do you think? Its not much I know but its a lot when you're a student lol.

I assume you have used already the interest free overdraft facility?

khull

1245 posts

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#668324 6-Aug-2012 14:15

I'd say you'd be mad loading items in your credit card that you can not afford to pay back at 19% interest compounded. I use mine for the air nz points :)

tardtasticx

3075 posts

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#668326 6-Aug-2012 14:20

John2010:
tardtasticx:
dolsen:
tardtasticx: Must admit, had a little heart attack right now. Maxed tertiary credit card, 19.45% interest. Planned to pay off slowly. Guess that isn't happening now.

Not sure of the back story of this however have you thought about a balance transfer to a different banks credit card with a low interest rate for 6 months?

I'm seriously considering doing this, but I'm not quite sure if they will give me a credit card, considering I'm only 18. But I already have an overdraft and credit card with ASB in their tertiary package, and am on account with Vodafone, I got a $500 card because I knew I'd go crazy otherwise and I'm glad I did that too.
Which bank is best for that do you think? Its not much I know but its a lot when you're a student lol.

I assume you have used already the interest free overdraft facility?

Yep. Lol. Think theres like $100 left of that. But study link comes in tomorrow :P Its just revolving debt now for me. I'm really disappointed in myself actually.

ajobbins

5052 posts

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#668328 6-Aug-2012 14:22

tardtasticx:
I'm seriously considering doing this, but I'm not quite sure if they will give me a credit card, considering I'm only 18. But I already have an overdraft and credit card with ASB in their tertiary package, and am on account with Vodafone, I got a $500 card because I knew I'd go crazy otherwise and I'm glad I did that too.
Which bank is best for that do you think? Its not much I know but its a lot when you're a student lol.

You would be surprised at what they will give you. I had a $5k credit limit while I was at uni. Working part time with an annual income of about $35k. Getting another card with a $500-1000 limit shouldn't be a problem if you have good credit history.

BNZ are very good (airpoints) and don't seem to be too fussy with their credit criteria. I would recommend a Global Plus card with them, or maybe a low interest card if you think you will take longer to pay the card off than the low interest transfer period.

Make sure you tell them the limit you want, or you may end up with much more than you want/need. I've done this before and ended up spending way more than I should have. And it was bloody hard work paying it back.

Twitter: ajobbins

jonb

1771 posts

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#668332 6-Aug-2012 14:32

tardtasticx:
dolsen:
tardtasticx: Must admit, had a little heart attack right now. Maxed tertiary credit card, 19.45% interest. Planned to pay off slowly. Guess that isn't happening now.

Not sure of the back story of this however have you thought about a balance transfer to a different banks credit card with a low interest rate for 6 months?

I'm seriously considering doing this, but I'm not quite sure if they will give me a credit card, considering I'm only 18. But I already have an overdraft and credit card with ASB in their tertiary package, and am on account with Vodafone, I got a $500 card because I knew I'd go crazy otherwise and I'm glad I did that too.
Which bank is best for that do you think? Its not much I know but its a lot when you're a student lol.

You also need to be careful doing balance transfers too - don't use this card to make any purchases until you've paid off the balance transfer. This is how I got stung.

Any purchases you make are charged at full interest, but there is no way to pay them off until you pay all the balance trasfer amount first. This will be specified under the 'payment information' section of the terms and conditions..

mattwnz

20141 posts

Uber Geek

#668339 6-Aug-2012 14:39

GeoffisPure: I was always of the belief that when you made a purchase on your credit, the first 55 days were interest free.

Not that simple, apparently.? The first 55 days are only interest free if you pay the entire card balance in full.? If you make a purchase, and you haven't paid your card balance in full within 55 days,? interest is calculated on that purchase? from day 1.

The more you know.

Pretty sure that has always been the case. That is why they prefer you didn't pay off the full amount each month, and often on the CC statement they will just prefill in the minimum amount you need to pay. At least on mine it does. I don't know how they can get away with such huge interest rates, when if you are buying a house the rate is only around a 1/4 of that.

mudguard

2113 posts

Uber Geek

#668340 6-Aug-2012 14:41

tardtasticx:
John2010:
tardtasticx:
dolsen:
tardtasticx: Must admit, had a little heart attack right now. Maxed tertiary credit card, 19.45% interest. Planned to pay off slowly. Guess that isn't happening now.

Not sure of the back story of this however have you thought about a balance transfer to a different banks credit card with a low interest rate for 6 months?

I'm seriously considering doing this, but I'm not quite sure if they will give me a credit card, considering I'm only 18. But I already have an overdraft and credit card with ASB in their tertiary package, and am on account with Vodafone, I got a $500 card because I knew I'd go crazy otherwise and I'm glad I did that too.
Which bank is best for that do you think? Its not much I know but its a lot when you're a student lol.

I assume you have used already the interest free overdraft facility?

Yep. Lol. Think theres like $100 left of that. But study link comes in tomorrow :P Its just revolving debt now for me. I'm really disappointed in myself actually.

Cut the card up, remove it from any presaved websites (like itunes) and repay it a $50 a week if you can. Then don't get another one until you're working full time.
This is how it starts. And I work at a bank.

BuzzLightyear

411 posts

Ultimate Geek

#668387 6-Aug-2012 15:38

John2010:
tardtasticx:
dolsen:
tardtasticx: Must admit, had a little heart attack right now. Maxed tertiary credit card, 19.45% interest. Planned to pay off slowly. Guess that isn't happening now.

Not sure of the back story of this however have you thought about a balance transfer to a different banks credit card with a low interest rate for 6 months?

I'm seriously considering doing this, but I'm not quite sure if they will give me a credit card, considering I'm only 18. But I already have an overdraft and credit card with ASB in their tertiary package, and am on account with Vodafone, I got a $500 card because I knew I'd go crazy otherwise and I'm glad I did that too.
Which bank is best for that do you think? Its not much I know but its a lot when you're a student lol.

I assume you have used already the interest free overdraft facility?

If you are an ASB customer you might find you can switch to a low interest bank direct visa card without too much drama. Bank Direct is owned by ASB (from memory). I used them years ago and liked there service and the easy switch between ASB and Bank Direct.
https://www.bankdirect.co.nz/section48.asp?

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