Best way to pay off monthly balance

By paying off your balance in full, by the settlement state on your statement, you will not have to pay interest on your purchases. If you have more than one card then it is advisable to pay off one of them in full rather than pay small amounts off on each. You will benefit from this because even if you don't meet the full balance by even a few pounds you will be charged interest, so its better to only have to pay interest on one less card rather than all of them.

This is illustrated in the example below:

• You have three credit cards, each with a £1000 limit, and you owe £500 on each one. All three charge interest at 1% per month, and offer a settlement time of 3 weeks from issuance of the monthly bill.

  You have £900 available to pay.

• If you simply divided your £900 into three payments of £300, you would then be left with £200 outstanding on each bill. However, as the balance is not being paid off in full, you will pay interest on the £200 outstanding balance, and the period between when you make the purchases and when a payment was received for the £300 you are paying off.

  1% interest on the remaining balance = £600 x 1% + 1% interest on the total balance before you made payment = £1500 x 1%.
  Total: £6 + £15 = £21

• If, instead, you paid off one card in full, you will then have £400 left to split between the other two, leaving £300 on each card.

  You would pay zero interest on the card you pay off in full, and 1% x £600 interest on the other cards = £6 + 1% x £1000 = £16.

Therefore you are saving yourself £5 per month by paying off one card in full. This adds up to potentially £60 per year, if you were to do this every month.