Full balance, by direct debit
Lesson 5 of 12 in our free Credit Cards: Tool, Not Trap guide: a 5-minute money game with the key points below.
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Questions you'll answer
Illustration: £1,500 on a card at 25% APR. You pay only the minimum (interest plus 1% of the balance, at least £5) and spend nothing more. Roughly how many years to clear it?
Same £1,500 at 25% APR, but a fixed £75 direct debit instead. Roughly how much interest in total?
Why does a full-balance direct debit beat remembering to pay?
Quick facts
- Pays whatever the statement balance is, every month → Full balance. Clears the lot each time.
- Pays the smallest amount the card will accept → Minimum. That's the minimum.
- Pays £75 every month whatever the balance → Fixed amount. A fixed amount.
- Keeps purchases interest-free → Full balance. Only clearing the full balance does that.
- Can take decades to clear a big balance → Minimum. Minimums shrink as the balance shrinks, so it crawls.
- Clears a balance on a set timetable, if you stop adding to it → Fixed amount. A fixed amount above the minimum gives you an end date.