Credit Card Interest Trap

Written on the 7 March 2011 by G. Dean McKinnon

The vast majority of credit card companies do not charge you interest for purchases (not cash advances), if you pay off the entire amount owing by the due date, but if you are $1.00 short they will charge you interest on the entire amount outstanding.

We recently had a client who had mistakeningly paid his credit card bill short by some miniscule amount and was charged interest on the entire bill for the month, even though he had paid 99.99% of the amount due.

If you are charging all of your expenses to your credit card each month, the unexpected interest cost could be significant, so remember to double-check all payments are made in full when due.

Author:G. Dean McKinnon
McKinnon Financial Planning Pty Ltd ABN 74 155 233 784 Australian Financial Services Licence 417488 | McKinnon Financial Services Pty Ltd ABN 82 056 817 648 Australian Credit Licence 392173 | General Advice Warning: Information contained in the pages of this website is of a general nature only and has not taken into account your particular circumstances. You should consider whether any strategies and or investments mentioned in this website are suitable for you and seek personal advice from a licenced investment adviser before making any investment decision.
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