Credit Cards
How credit card interest is actually calculated
The headline rate is annual. What you pay depends on the balance each day and on losing the interest-free period.
Marcus Achterberg
Cards writer, The Credit Question
Marcus writes about credit cards, interest calculation and balance transfers.
Contact Marcus through our contact page — mark your message for their attention and it will be passed on.
18 articles
Borrowing
Buy now, pay later is credit, and it is starting to show
Deferred payment products sit outside older consumer credit rules in many places, and that is changing.
Borrowing
Representative APR means most applicants do not get it
The advertised rate is a threshold a minority of successful applicants must receive, not an offer to you.
Borrowing
What happens when an application goes to manual underwriting
Most decisions are automatic. When one is referred to a person, different evidence matters and the outcome is genuinely open.
Borrowing
Car finance agreements are three different products in similar brochures
Hire purchase, conditional sale and balloon-payment contracts differ in who owns the vehicle and what happens at the end.
Credit Cards
The minimum payment is engineered to last for years
Paying the minimum is not slow progress. On a typical structure it is a schedule measured in decades.
Credit Cards
Cash advances start charging the moment you take the money
Withdrawing cash on a credit card is a different product from spending on it, priced differently and reported differently.
Credit Cards
Payment allocation decides which balance you actually reduced
A card can hold several balances at different rates, and the order your payment clears them changes the cost substantially.
Credit Cards
Statement date, due date and the gap that sets your interest
Two dates control what a card costs and what your file reports, and most people only know one of them.
Credit Cards
Credit limit increases you did not ask for
An unsolicited increase changes your utilisation, your affordability profile and your temptation, all without a decision from you.
Credit Cards
Persistent debt rules and the letter that eventually arrives
Some regulators now require issuers to intervene when a customer pays more in interest than they repay in principal over time.
Credit Cards
Store cards are usually the most expensive card in the wallet
A discount offered at the till is a sales technique attached to a credit agreement, and the two are rarely compared.
Credit Cards
A rate increase on a card can often be rejected
When an issuer raises the interest rate on an existing balance, many regimes give the customer a right to refuse and repay at the…
Borrowing
Self-employed applicants are assessed on different paperwork
The income is often perfectly good; the problem is that it arrives in a form standard verification was not designed to read.
Borrowing
Credit unions and community lenders run on different arithmetic
Member-owned and non-profit lenders exist in most countries, and the way they assess and price borrowing is structurally unlike a…
Credit Cards
Chargebacks are a scheme rule, not a legal right
The card network process that reverses a payment is powerful, time-limited and entirely separate from any statutory protection you…
Credit Cards
Authorisation holds make your available credit lie
Hotels, fuel stations and car hire desks reserve money on a card without taking it, and the reservation can outlast the transaction…
Credit Cards
An annual fee only pays for itself under narrow conditions
A card that charges to exist can be worth it, but the arithmetic depends on spending patterns most holders do not actually have.