The remaining balance is the interest that accumulates when you carry a credit card balance from month to month. The remaining balance continues to accrue after a new statement is issued until your payment is posted.
Definition of Remaining Balance and an Example
The remaining balance, also known as “accrued interest,” is the interest that accumulates when you carry a credit card balance from month to month. This interest continues to increase from the time your current bill statement ends until your next payment is posted.
Alternative name: accrued interest
For example, let’s say your billing statement closes on the first of the month, and you pay your credit card bill when it’s due on the seventh. The remaining interest will continue to accrue during those six days.
If you incur remaining interest, try to pay it off in full as soon as possible. This will stop the continued accumulation of interest.
Note: If you believe that remaining interest has been charged incorrectly, you can dispute the billing error within 60 days of the statement. Your credit card company should include information on where to send the dispute in your billing statement.
How Remaining Balance Works
When you open a credit card, you have the option to make minimum payments each month. Many borrowers choose to pay their balance in full, however, to avoid paying interest charges. However, the remaining balance starts to accrue after your billing statement ends and continues until the lender posts your payment for the month. In those cases, you may be subject to remaining interest charges that you might not expect.
To calculate the amount of remaining interest you will owe, divide the annual percentage rate (APR) by the number of days in the year. For example, if you have an annual interest rate of 17% on your credit card, you would divide 17 by 365 and get 0.0465%.
From here, you will multiply this percentage by your current balance on the card. If you have a balance of $2,000, you would incur about 93 cents in remaining interest charges for each day your balance remains unpaid (0.0465% × 2000 = $0.93).
In this case, if your billing cycle starts on the first of the month and your $2,000 payment is posted on the eleventh, you would be charged about $9.30 in remaining interest for those ten-day periods.
Note: If you pay off the balance in full on a card that has remaining interest, be sure to check your next credit card statement. You may have interest charges from the remaining balance that accrued.
There are ways you can avoid remaining balance fees. Some credit card companies offer a grace period between the end of the billing cycle and the due date for payment. As long as you pay your balance in full for the month before that grace period ends, no remaining interest will be charged.
If your credit card company does not provide a grace period, your best option is to pay your balance in full before the statement closing date. Paying your balance early ensures no remaining interest accumulates after your billing cycle ends.
Main Takeaway
The remaining balance, or accrued interest, refers to the interest that accumulates when you carry a credit card balance from month to month. This type of interest starts to accrue after you receive your credit card statement, so you could pay your bill in full and still see remaining interest charges on your statement for the next month. You will calculate your remaining interest by dividing the annual percentage rate (APR) by the number of days in the year and then multiplying that percentage by your credit card balance. The resulting number is the amount you will pay for each day your bill remains unpaid after the statement closing date. Some credit card companies provide a grace period between the end of the billing cycle and the payment due date. If your credit card company does not offer a grace period, you can avoid remaining interest by paying your balance in full before the billing cycle ends.
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Sources:
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts in our articles. Read our editorial process to learn more about how we verify facts and maintain the accuracy, reliability, and quality of our content.
Office of the Controller. “Fees.” Accessed November 8, 2021.
Source: https://www.thebalancemoney.com/what-is-residual-interest-5208822
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