Residual interest

Residual interest is a charge for the use of money that only applies to credit card holders who carry forward balances from month to month. The charge is calculated for the period from when a credit card statement is issued to when the card holder pays the statement. From the card holder's perspective, the most unexpected effect of this calculation is that interest is charged on the following card statement. Thus, if less than the full balance is paid in the current period, an additional interest charge will appear in the following month, as well. A card user can only avoid this additional fee by calling the card company and asking for the full payoff amount, which includes the residual interest amount.

A card holder who pays the full amount of a card statement on time is not charged any residual interest.

Similar Terms

Residual interest is also known as trailing interest.