What is residual interest?

If you’re paying off your credit card balance, it’s important to know about residual interest.

In simple terms, it’s the interest calculated on your balance in the days between your statement being issued and you making a full statement balance payment.

It doesn’t always apply though, so make sure you read through the detail below to gain a full understanding.

Here’s an example of how residual interest works

We’ve shown some figures, just for illustrative purposes:

Your statement arrives image

1. Statement arrives

You haven’t used your credit card in over a month so, when your latest statement arrives, you decide to pay off the balance shown in full.

Checking your balance image

2. Check balance

The amount shown on your statement is £2,198.09. This includes all interest charged up until the date the statement was produced, but not any interest that’s accumulated since.

It’s useful to remember that interest is calculated daily, then charged on the following monthly statement.

Making a payment image

3. Make payment

You decide to make a payment of £2,198.09 using your debit card.

Next statement image

4. Next statement arrives

Your next statement arrives. At this stage, you haven’t used your credit card in over two months. The statement balance is £18.02, which covers the ‘residual interest’ charged between your previous statement being produced and the date your last payment reached your account.

Making another payment image

5. Make another payment

You make a further payment of £18.02 which then clears your balance in full.

As that £18.02 is purely interest, we won’t charge further interest on that amount. Some lenders may refer to this as a ‘final interest charge’.

All done Image

6. All done

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

No further statements will be issued while there's no balance to pay and new account activity.

When residual interest won't apply

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

It’s only really important to know about residual interest if, after making a full statement balance payment, you aren’t planning to use your credit card again for a while. We want you to be aware that a further payment for any outstanding interest may apply.

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

If you’re not paying interest 

There are a couple of ways you can avoid paying interest completely:

  1. If a 0% introductory or promotional rate applies to your balance and you pay it off before that rate expires.
  2. Take advantage of up to 56 days interest free on purchases, as long as you pay off your balance in full every month. 

More about credit card interest

Stay on top of your payments

  • As well as fees and charges, your credit record could be affected if you miss a payment or go over your credit limit.
  • You must make at least the minimum payment on time each month, but we recommend paying as much as possible to reduce your balance and the amount of any interest you pay overall. This could also help you to avoid falling into persistent debt.

Key points about residual interest

  • This covers any interest calculated on your balance in the days between your statement being issued and you making a full statement balance payment.
  • It’s important to remember, even if you don’t use your card again, you may need to make a payment the following month to cover any residual interest.
  • We don’t charge further interest when there’s only interest left to pay.

Where next?

Important legal information

Lloyds Bank plc. Registered Office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales no. 2065 Lloyds Bank plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number 119278.Visit the Lending Standards Board website

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