[UK] Help please on credit cards

[Kpnuts]

I've recently gotten my first credit card, and now would like to use it to make a small cash withdrawal, £80.

Can someone explain to me how this will impact my bill. I'm not totally sure about APR etc, so would be interested if someone could give me an idea?

For the record, I can pay this cash back within a week or so.

I'm just curious how this will hit me, interest wise, and what I would have to expect on my next bill.

My friend says I'll be charged daily interest at about 25% APR, is this correct and what does this mean? They'll add an extra £20 of interest per day?? Surely not!

Thanks in advance

 

[Rocketman]

Most reputable organisations(*) report annualized interest rates. So 25% per year amounts to 0,43% per week, or 1,87% per month.

Mind you, it's still a very high rate.

(*) i.e. not the local loanshark.

 

[All Seeing Eye]

The interest on cash withdrawals is enormous compared to if you just use it to outright buy something.

I woudn't dream of withdrawing cash on a credit card.

 

[Kpnuts]

Ok so let's say, I withdraw £100 from my credit card. And let's say the APR is 25%

What would it say on my first bill?

£100 + 2% of the £100: £2 = £102?

Or have I got that completely wrong

 

[Hermiod]

You pay off most credit cards monthly. You get a statement saying what you owe and you pay off as much of that as you can by the date specified on the statement. The rest you are charged interest on.

If you pay the full amount off then you are not charged any interest at all.

If you spend/withdraw £100 on your card and then pay back £100 before the date on the statement your interest should be zero.

 

[Kpnuts]

I see, as you can tell I'm a bit clueless when it comes to credit cards.

I have 0% on purchases for 12 months, so plan on buying a laptop with that, and paying it off within a year. So that should mean £0 interest.

And to withdraw cash, it would literally be a temporary thing, I'm planning on taking out £100 now, and can pay it back when my first bill arrives.

So you're saying I won't be charged a penny of interest? My friend says they charge the cardholder something like 3% off the amount up front.

So in the end, if I pay £103 when I get my first bill that will be the end of that? Correct? Thanks for the tips btw

 

[Deckerd]

You only pay interest on any outstanding money you owe after your statement comes in and you have paid whatever you are going to pay for that month.

 

[Kpnuts]

Ok great thanks. So basically, withdrawing cash from a credit card isn't so bad, as long as you can pay it all back in full when you get your next bill?

 

[Deckerd]

Yes.

 

[Bob The Skutter]

Ok great thanks. So basically, withdrawing cash from a credit card isn't so bad, as long as you can pay it all back in full when you get your next bill?

Yeah, so long as it's paid back within the month there is no interest to pay... but read the small print on the 12 months interest free on purchases offer, because some offers only hold so long as you only use it for purchases, or whatever, as soon as you take money out on it you lose the offer.
They play dirty tricks like that some credit card companies.

 

[Pingfah]

Actually almost all credit cards charge interest on cash withdrawals from the moment you take them out.

 

[Hermiod]

Yeah, that's one thing to be careful of. I have never used my credit card to get cash so I don't know if there's some specific issue with that.

 

[Pingfah]

The thing to be careful of is that when you pay back money, they take it off the balance with the lowest interest rate first.

So if you have a balance of £100 on a 0% interest deal, and a balance of £100 on a cash withdrawal and you pay back say £50 they will use it to pay off the money on the 0% interest balance, leaving you with £50 on 0% and still £100 on the cash withdrawal rate.

The only way to pay off the cash balance is to pay off the entire 0% balance first. Be VERY careful of this.

 

[Kpnuts]

The thing to be careful of is that when you pay back money, they take it off the balance with the lowest interest rate first.

So if you have a balance of £100 on a 0% interest deal, and a balance of £100 on a cash withdrawal and you pay back say £50 they will use it to pay off the money on the 0% interest balance, leaving you with £50 on 0% and still £100 on the cash withdrawal rate.

The only way to pay off the cash balance is to pay off the entire 0% balance first. Be VERY careful of this.

Ah that's a very interesting and annoying point.

I'll likely be buying a £1000 purchase + withdrawing £100 at the same time.

Which means I'll have to pay off £1000 before the £100 then right? Damn, that's no good.

It's a Tesco finance card. The bit about them cancelling the 0% interest on purchases the second I make a cash withdrawal is a bit scary as well, I might have to ring them up and check that doesn't happen.

 

[Pingfah]

Ah that's a very interesting and annoying point.

I'll likely be buying a £1000 purchase + withdrawing £100 at the same time.

Which means I'll have to pay off £1000 before the £100 then right? Damn, that's no good.

It's a Tesco finance card. The bit about them cancelling the 0% interest on purchases the second I make a cash withdrawal is a bit scary as well, I might have to ring them up and check that doesn't happen.

Well, give them a call and check, but I have a tesco card and as far as I know that is not what they do. The 0% on purchases should stand for all purchases made using the card regardless of if you have a cash balance.

But yeah, if you are spending £1000 on it, definitely do not withdraw £100 as well unless you are planning to pay of £1100 at your first payment.

 

[Scout101]

If you're charging 1000 pounds, why not just charge the extra 100? Or, rather, what do you need the extra 100 for?

An excellent way to dig yourself into serious credit card problems and debt. Generally, if you can't pay it off immediately, you probably shouldn't charge it.

 

[Azlynn]

You really need to check things, as credit cards start charging interest THE DAY A CASH WITHDRAWAL IS MADE. Cash withdrawals are treated differently than purchases. Yes, with purchases you have until the bill. With cash, NO. You WILL be paying interest on the 100 pounds, even if you pay it on the first bill. Plus that 2% fee.With only 100 pounds it won't be huge, but you'll be paying interest from the day of the withdrawal.

It's one thing to do it if you're on holiday and have issues with debit not working, but if you're counting on it for day to day, you're already hosed and need to take a serious look at your finances.

 

[WillsBabe]

Can someone explain to me how this will impact my bill.

Cash withdrawl on credit cards is very expensive. How expensive I don't know. My very best advice is to phone your credit card company and ask them the question.

 

[AdAstra]

^ IIRC, I think it's like 2-3% up-front in Belgium.

For cash-withdrawals, I use my Maestro card. Much cheaper than credit cards for cash, even abroad.

 

[tharpdevenport]

If you're clueless, you should NOT have dived head first into credit cards. That's one of hte worst mistakes a person can make, aside from running a red light at a busy four-way intersection.