What is residual interest

Residual interest covers any interest calculated on your credit card balance in the days between your statement being issued and you making a full statement balance payment.

Here’s an example of how residual interest works

The figures we’ve used are just for illustration.
 

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1. Statement arrives

You haven’t used your credit card in over a month. When your latest statement arrives, you decide you’ll pay the outstanding balance in full.

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2. Statement balance

The amount shown on your statement is £2,198.09. This includes interest chargedIt’s useful to know that interest is calculated daily, then charged on the following statement. up until the date the statement was produced, but not interest that’s accumulated since.

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3. Make payment

You make a payment of £2,198.09 using your debit card. This will reach your account by the next working day.

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4. Next statement

By now, you haven’t used your credit card in over two months. The statement balance is £18.02, which accounts for ‘residual interest’ charged between your previous statement being produced and the date your last payment reached your account.

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5. Make payment

You make a payment of £18.02 which clears your balance.

As the £18.02 is purely interest, we won’t charge further interest. Some lenders might call this a ‘final interest charge’.

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6. All done

You’ll receive a final statement, but this time it’ll show your balance as paid in full.

Statements won’t be issued while there's no balance to pay, or recent account activity.

When residual interest won’t apply

If you’re using your credit card on a regular basis

If you continue to use your credit card, it’s natural that you’ll be expecting monthly statements and to make further payments in line with the terms of your credit agreement.

It’s only really important to consider residual interest if, after making a full statement balance payment, you’re not planning to use your credit card for a while. Just bear in mind that you might need to make another payment to cover any remaining interest charges.

If you’re not paying interest
 

Interest won’t apply in the following situations:

  • If a 0% introductory or promotional rate applies to your balance, and you pay it off before the interest rate expires.
  • You’ll get up to 56 days interest free on purchases, as long as you pay off your balance in full every month.


Read more and watch a short video about credit card interest

Stay on top of your payments

  • In addition to fees and charges, your credit record could be negatively affected if you miss a payment or go over your credit limit.
  • You have to make at least the minimum payment on time each month, but it’s a good idea to pay as much as possible to reduce your balance and keep any interest costs down. This could also help you to avoid persistent debt.

 

Tips for managing your credit card

A summary on residual interest

If you’re paying off your credit card balance in full, you need to know about residual interest.

 

  • It covers any interest calculated on your balance in the days between your statement being issued and you making a full statement balance payment.
  • Even if you don’t use your card again, you might need to make a payment the following month to cover any residual interest.
  • If you don’t keep up with payments, fees and charges could apply and your credit score could be negatively affected.
  • We don’t charge further interest when there’s only interest left to pay.

Want to read more?
 

Halifax is a division of Bank of Scotland plc. Registered in Scotland No. SC327000. Registered Office: The Mound, Edinburgh EH1 1YZ. Bank of Scotland plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number 169628.