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Understanding interest

Credit cards can be used to help you manage short term cash flow. Perhaps most importantly though, they allow you to make purchases without using your own money, and so allow you to “buy now, pay later”.

Credit cards charge interest daily on any outstanding balance. The balance doesn’t just include purchases made with the card - it can also be from cash advance transactions, balance transfers, promotions, interest from previous months and any related fees and charges. Each interest rate that applies to the account during a statement cycle is set out on the relevant statement.

How is interest calculated?

Interest is charged at the end of the statement period and is calculated on the sum of the interest charges on the daily outstanding cash advance balance, purchase balance and balance transfer amounts.

What about interest on cash advance transactions and balance transfers?

Interest is charged on cash advance transactions and balance transfers from the date they’re made until the amount of the transaction is paid in full.

What is a statement cycle or statement period?

The date that your statement is issued is called the “statement date” and the period from one statement date to the next statement date is called the “statement cycle”.

A statement cycle doesn’t have to begin and end on the first and last day of the month - it’s usually based on the day on which you opened your credit card account.