Martin Lewis has issued a warning about a common credit card trap that could cost UK consumers significant amounts of money. The financial expert took to social media to explain how being just a penny short on a credit card repayment can lead to interest being charged on the entire balance, not just the remaining amount.
How the trap works
In a post on X, Lewis illustrated the issue with a simple example: 'Imagine you've spent £1,000 on the credit card. If you then pay off the £1,000 so you totally clear it, there is no interest in the month.' He added: 'If you were to pay off £999.99, so you're just a penny short, you don't pay interest on a penny for the month, you still pay interest on the entire £1,000.'
This means that being a penny short results in interest being charged on the full balance, not just the outstanding amount. Lewis emphasised that his catchphrase for years has been to pay off your credit card in full, stressing that 'the in full is important.'
Impact on reward and cashback cards
Lewis was particularly pointed about this issue when it comes to reward and cashback credit cards. 'If you don't pay in full, you neuter the credit card's ability to charge you interest. If you miss even a penny, it can still charge you a whack,' he said. He warned that the moment interest kicks in, any reward or cashback the card was supposed to deliver is almost certainly wiped out.
A spokesperson for Single Parents Portal commented on the warning: 'Martin's warning is important because the trap is easier to fall into than most people realise. A lot of cardholders do not know that their statement balance and their current balance are two different figures, and paying the wrong one is enough to trigger exactly the interest Martin is describing.'
Compounding interest risk
The spokesperson added that once interest is triggered, it compounds month on month, and what started as a small shortfall can grow into a significant sum surprisingly quickly. They advised: 'The simplest protection is a direct debit set to pay the full statement balance automatically every month — that way you never accidentally fall short, and you never give the card the opportunity to charge you.'
Lewis's warning serves as a crucial reminder for credit card users to always pay off their balance in full to avoid unnecessary interest charges. For those with reward cards, missing even a penny can negate the benefits of the card entirely.
