Martin Lewis says you can’t ever leave even 1p on a credit card (Image: ITVX)
has issued a warning to anyone who leaves even a penny on their credit card balance.
The founder revealed there’s a little known quirk about how work that will leave you forking out much more in interest payments than you should.
That’s because if you pay off anything less than the whole balance before your next statement, you don’t just get charged interest on what’s left, you get charged interest on the entire balance before you paid anything.
It means that even if you have a 1p on your you’d be charged interest on whatever was on the card before you made any payments.
Speaking on the latest instalment of The Podcast on Sounds, Spotify and Apple Music, Martin Lewis said: “What is my catchphrase when I talk about credit cards? In full!
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“Do I say, nearly in full, or do I say, in full? In full!”
“And the reason I say that is this if you pay nearly, if you’ve got £2,000 [on your credit card] and you pay off £1,950, you are charged interest for that month on the whole £2,000.
“It is only if you fully clear it you don’t pay interest.
“So it is not 25% interest on £50, it’s 25% interest for the month on the whole £2,000.”
went on to explain to co-host Adrian Chiles that you actually have as many as 56 days to pay off the balance without paying interest if you buy an item on the first day of your statement.
But you will still pay interest on the entire balance at the start of the month if you leave even a penny on the card.
He continued: “Because you get this 56 day interest free payment, but you only get that if you pay it off in full.
“That is standard credit card rules, has been for decades.
“I just assumed it was a month, actually if you bought this item on the 1st day of the statement period, you’ve got 56 days [to pay it off before being charged interest] and you’ve actually got 56 days of interest on the £2,000.
“But the thing people need to remember and the reason I say IN FULL, pay off your card in full, is if you miss a penny on £2,000, you pay interest not on the penny, you pay interest on the whole £2,000.
“That’s how credit cards work. It’s one of the ways they make more money from you than they should, and you need to know it, and that’s why I have the catchphrase ‘in full’.
“It’s not nearly in full, it’s not best to nearly pay your debts off, it’s in full, or you’re paying interest on the whole amount.”