Confused about paying credit card in full - how does it work?
August 29, 2012 7:39 PM   Subscribe

Confused about paying credit card in full - how does it work?

I have a Chase Sapphire card and always try to pay in full at the end of the month.

Last month, I paid a few days earlier for the maximum amount I could pay (Say $500 for arguments sake).

However, there were pending charges (ex. $250) that I could not pay at the time. Fast forward to today, on my statement I see a "Balance" for last month's $250 that I wasn't able to pay.

I'm confused on how to actually pay in full on pending charges at the end of the month. Also, am I penalized for these charges?
posted by telsa to Work & Money (15 answers total) 1 user marked this as a favorite
I try to time everything out so that I'm able to pay in full with nothing pending.

If for some reason I can't, I just pay again as soon as the new charges hit my account.

So far I haven't been charged a cent of interest, any late fee, and my credit report shows no balance carried over for any month that I've had the card.
posted by Sara C. at 7:43 PM on August 29, 2012

The way every credit card I own works is like this: Every month the credit card 'closes out' all charges for that month, but the bill for those charges isn't actually due right that day. It's usually due 2 weeks later. They don't charge interest on that bill until after the deadline.

Any charges that post between the end of the bill and when it's due are actually on the next month's bill. You don't get charged interest on it.

When people talk about paying in full at the end of the month, they don't necessarily mean that they pay down the credit card literally to zero. They mean that they pay each bill in full.
posted by muddgirl at 7:48 PM on August 29, 2012 [11 favorites]

Interest is charged monthly, but never for what was put on the card that month. Your statement is sent at at the close of the billing cycle, and if you pay that amount you should never have interest charges. Any charges in the next billing cycle will not show up until your next statement, and not accrue interest if they paid off on the first bill they show up on.

For example, if your billing cycle runs from 7/15 to 8/14:
Charge 1: 7/20 for $100
Charge 2: 7/25 for $100
Charge 3: 7/29 for $50
Charge 4: 8/4 for $100
Charge 5: 8/10 for $150
Charge 6: 8/20 for $250

Charges 1-5 were made in the billing cycle and total $500. You will get your monthly statement in the mail probably around maybe the 19th and the bill will be due by perhaps the 5th of the next month (just throwing out theoretical dates here, obviously). By August 5th, you need to pay $500. The next billing cycle will close on Sep 14th and will show that you paid $500 and have $250, no interest, and XX amount is due by Oct 5th.

Now, there are a few cards that don't work this way, but the vast majority are of this type. I'm not familiar with your specific card so I'm assuming it falls under the normal type.
posted by DoubleLune at 7:49 PM on August 29, 2012 [1 favorite]

As long as you pay the full balance on the paper or PDF billing statement (not the online "current status" thing), you will have paid in full. Stuff that is pending after the billing cycle closes goes on next month's bill.
posted by gjc at 7:49 PM on August 29, 2012

I've been able to pay ahead of time and above the stated charges.
I've also called for the most up todate balance and sent that in.
posted by calgirl at 7:50 PM on August 29, 2012

In other words, if you pay the $250 before the statement deadline, you've paid "in full." For every card I've carried - I don't carry a Chase Sapphire.
posted by muddgirl at 7:50 PM on August 29, 2012

I pay my statement balance in full every month, but usually by the time the statement has processed there are new charges, so my balance never shows as zero, but I'm never paying interest. If you pay before receiving the statement, you'd need to check the statement and make sure it doesn't include more charges than what you paid for.
posted by songs about trains at 7:51 PM on August 29, 2012

Just pay the full amount on your bill when the bill becomes available.

If you try to mess around with paying before the statement is cut, you will either have to make another payment after the statement is cut or risk having a late/ missed payment.
posted by rabbitrabbit at 8:13 PM on August 29, 2012

Credit card companies don't ask you to pay anything until the end of a billing period typically. For some reason, credit card charges take a few days to 'settle' and make you officially responsible for the charges. The $250 probably 'settled' outside the previous billing period (usually an arbitrary 30 day period or so) and were added to the next billing period (the next 30 days) so assuming you didn't spend anything on that card after that $250 if you pay that off in full next month after you get that months bill you'd have a balance of $0.
posted by jourman2 at 8:34 PM on August 29, 2012

You're comparing the "statement balance" to the "total balance". You will only get charged interest if you don't pay off the statement balance by the due date. Total balance includes subsequent charges after the billing cycle is over.
posted by gaspode at 8:37 PM on August 29, 2012

It is not in your best interest to pay more than the statement balance on your credit card bill, unless you psychologically hate having any balance pending on the card.

This is because you don't need to pay that amount until you are billed for it, which won't be until the next cycle, and in the meantime you can keep the money in your own bank account and earn interest on it. This same sort of thing could be done with your other bills, like your electric bill or your phone bill, usually - you can overpay the bill before the money is due and the excess amount will be applied towards the next month's balance, but again, it's in your interest to keep the money in your own account as long as usual rather than pre-paying on bills you expect to owe in the future.

Just make sure you have always paid the full statement balance by the due date of that statement and you'll be fine.
posted by treehorn+bunny at 8:48 PM on August 29, 2012

Confused about paying credit card in full - how does it work?

Your credit card statement shows a total amount due and a due date. If you pay the total amount due by the due date, you have paid in full. Charges from the next billing cycle do not come due, and generally do not accumulate interest, until the credit card company bills you for them and the next due date arrives.

So, I don't think I understand the below-the-fold part of your question. You got a bill for $750 but only paid $500? And the balance showed up on the next bill? In that case, you didn't pay the first bill in full.

If that's not what happened here, then I don't understand the question. Are you confused about calendar months vs. billing cycles? Billing cycles don't always coincide with calendar months. For example, your billing cycle may run from the 23rd of one month to the 22nd of the next month, every month.
posted by Orinda at 8:55 PM on August 29, 2012

p.s. One clarification: I should have said "total charges" rather than "total amount due." The bill will often list a "minimum amount due," which you should ignore, because it will be a small fraction of the total charges. If you want to pay your bill in full, look for the total charges.
posted by Orinda at 8:59 PM on August 29, 2012

When you say "end of the month" do you mean end of the calendar month or end of the billing cycle? You get a statement each month, but it generally doesn't coincide with the calendar month - like, your billing cycle will be from June 20th to July 19th, and you'll receive a statement a few days after July 19th. Paying off the statement balance each month will avoid incurring any interest or finance charges. If you're trying to pay everything off at the end of the calendar month rather than when you receive a statement, I can see why you might be having difficulty.
posted by zombiedance at 11:32 PM on August 29, 2012

Yeah, it sounds like you are trying to pay off the balance before the bill is generated, such that when the bill arrives it says you owe zero dollars. That's not how you're supposed to do it. The answers above are correct. Just pay the full amount of the bill before the due date, and you'll be fine. Don't worry about pending charges that aren't reflected on the bill. Those will be on next month's bill.
posted by Nothlit at 5:41 AM on August 30, 2012 [1 favorite]

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