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What is residual interest?
If you’re paying off your credit card balance, it’s important to know about residual interest.
A quick summary
- This covers any interest calculated on your balance in the days between your statement being issued and you making a full statement balance payment.
- It’s important to remember, even if you don’t use your card again, you may need to make a payment the following month to cover any residual interest.
- We don’t charge further interest when there’s only interest left to pay.
In simple terms, it’s the interest calculated on your balance in the days between your statement being issued and you making a full statement balance payment.
It doesn’t always apply though, so make sure you read through the detail below to gain a full understanding.
Here’s an example of how residual interest works
We’ve shown some figures, just for illustrative purposes:
1. Statement arrives
You haven’t used your credit card in over a month so, when your latest statement arrives, you decide to pay off the balance shown in full.
2. Check balance
The amount shown on your statement is £2,198.09. This includes all interest charged up until the date the statement was produced, but not any interest that’s accumulated since.
It’s useful to remember that interest is calculated daily, then charged on the following monthly statement.
3. Make payment
You decide to make a payment of £2,198.09 using your debit card.
4. Next statement arrives
Your next statement arrives. At this stage, you haven’t used your credit card in over two months. The statement balance is £18.02, which covers the ‘residual interest’ charged between your previous statement being produced and the date your last payment reached your account.
5. Make another payment
You make a further payment of £18.02 which then clears your balance in full.
As that £18.02 is purely interest, we won’t charge further interest on that amount. Some lenders may refer to this as a ‘final interest charge’.
6. All done
You will receive a final statement, but this time it’ll show your balance as paid in full.
No further statements will be issued while there's no balance to pay and new account activity.
If you’re not paying interest
There are a couple of ways you can avoid paying interest completely:
- If a 0% introductory or promotional rate applies to your balance and you pay it off before that rate expires.
- Take advantage of up to 56 days interest free on purchases, as long as you pay off your balance in full every month.
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