Variations in credit card interest calculations
The surprising differences outlined on the previous page are accounted for by six different ways of working out the interest due. In some cases more than one of the points can be used, making it extremely difficult to compare without all the relevant facts.
- Interest-free periods are a tempting offer and obviously the overall rate would be altered by whether this was used or not.
- Interest rates may be charged up to the date of the full repayment or until the date of the statement prior to the balance being paid in full. This makes a difference, again.
- Interest rates vary depending on whether interest is worked out on a daily or monthly basis.
- Interest rates may start on the date of the purchase of the goods or the date the invoice is posted to the account.
- There is a difference in charges depending on whether they're charged until the day prior to the statement being produced or on statement date...
- The final difference depends on whether or not the balance includes interest which was charged on the statement for the previous month.
Which? is of the opinion that all credit cards should have an unconditional period which would be free of interest on new purchases and a very much clearer explanation of the interest calculation.
The intervention of the Office of Fair Trading should throw some welcome light on these deals. As always, it's the total amount of money which you pay out which is important, whatever the quoted interest rate.
Make sure you're aware of the entire pros and cons before you commit yourself to that "bargain rate".