What is Interest Saving Balance?

What is Interest Saving Balance?

The concept of interest saving balance has been catching the attention of people lately. This is because it is a new system that has been implemented by a few banks and other financial institutions.

The question is, what is an interest saving balance and how does it work? The idea of the interest saving balance is that you are presented with a minimum amount of money you can pay upfront that will protect you from having to pay an additional interest rate.

For credit cards and other loans that naturally have interest attached to every installment of your payment, the interest saving balance could mean that you end up paying an overall lower price. This can seem very appealing, but there is more to it than meets the eye.

Because the interest saving balance feature is still new and unknown, there are many questions surrounding the concept. The idea of a minimum payment is nothing new, and the interest-saving balance works in the same way that minimum pay does.

However, there is still the question of how it works to eliminate your interest and whether it is an option worth taking. This article will be explaining all about interest saving balance, how interest on credit cards works, and how businesses like Amazon have made use of interest saving balances in their models.

Definition of interest saving balance

When you have a loan like a credit card or other types of loan, you have to make regular, often monthly payments to pay it off. These payments are often accompanied by interest charges that are a percentage of the total loan value.

The interest saving balance option introduces a means for you to pay off your credit card bill and avoid interest charges by paying a minimum amount. Paying this minimum amount means that you no longer have to pay interest charges for the rest of the loan term.

This option is very appealing because sometimes the charged interest alone on a loan can end up being a very high amount of money. However, you shouldn’t just choose the interest savings balance option without first reviewing it and finding out what it’s all about.

Should I choose to pay interest saving balance?

The option to avoid paying interest on your loans obviously sounds very appealing, but you should always remember that there is nothing like free money. This feature has some setbacks just like any other feature, and we will be explaining the two main setbacks to this feature.

Minimum interest charge

When you take out a loan, there are two different types of interest you pay. The first of these is the APR or annual percentage rate which is the total annual interest on the loan. This rate is divided by 12 to determine your monthly interest.

Secondly, there is the minimum interest charge. This is a minimum interest rate that is compulsory to be paid as long as you still have credit card balances. Even if you pay the interest saving balance, you will still have to pay the minimum interest charge.

Accumulation of fees

Credit card bills add up. This is undeniable. If you are trying to avoid paying interest rates and you choose to do this by paying the interest-saving balance, you will still end up paying increased amounts if you continue to have a balance.

This is because, for as long as you have a balance on your card, there will always be a charge on it. Your interest saving balance will adapt to reflect this. The best way to avoid interest rates will always be to pay off your credit card bills on time each month.

How card interest works

Your credit card interest is the percentage of your card balance that you have to pay in exchange for your bank lending you money. Credit card interest works in the same way that interest on other loan types works.

The purpose of a credit card is to allow people to spend money that they do not currently have without worrying about having to pay cash immediately. They are very handy tools and are widely used by many people. They work as an acceptable payment method globally.

When you use a credit card, you have to pay off the bill every month. Your monthly credit card bill is known as your credit card balance. When people fail to pay off their balances, they are charged an interest rate that increases their total balance value.

The interest rate charged on credit cards is referred to as the APR, which is the annual percentage rate. For monthly interest payments, the APR is divided by 12 and for daily interest calculations, it is divided by 365 days.

Banks and other lenders do not charge interest on credit cards if the cardholder pays off their balance monthly. However, most cardholders are unable to do this and end up having to pay interest. This is not a bad thing, and as long as you have your balance under control, paying card interest is not likely to leave you in bad credit card debt.

A typical example of how credit card interest looks can be shown below:

If a cardholder has a balance of $2000 at the end of a billing cycle and is unable to pay, their initial balance is that. Say their APR is 20%. To find the monthly rate, the APR has to be divided by 12 which leaves a monthly rate of 1.67%. There will also be a minimum interest rate, which we can assume to be about $10.

That means that their monthly charge is now $2,043. Going into the next month, they would have to pay off the balance of that month as well as the previous balance of $2,043. They can pay off this balance throughout the billing cycle to reduce their balance when the month is over.

In a situation where the interest saving balance option is available and is set at $200, for example, it may look like this:

Initial balance: $2000

Interest charge: $33

Interest saving balance: $200

Minimum interest: $10

Current balance: $1,810

Here, the person will only have to pay the $200 interest-saving balance. This leaves them with a new balance of $1,810 instead of the previous $2,043. Keep in mind that your card will continue to accrue interest, even if you continue to pay interest-saving balance.

Interest charge purchase

Sometimes, when you see your monthly credit card statement, you may find some confusing transactions that you don’t understand. Your interest purchase charge is one of these transactions that can confuse you.

Sometimes, your bank may charge your interest fee as a separate transaction on your monthly statement balance. This is known as an interest purchase charge. The interest fee shows up in your statement as a separate transaction as if you purchased something.

When you see a transaction like this on your credit report, don’t be worried or confused. It just means that your bank has charged you for your interest, and that is a reflection of the transaction. The reason the interest charge purchase is separate is that you are not charged interest every month, ideally.

Therefore, the interest fee cannot be included in the transaction details of your regular card payment and is given its own transaction details. This is especially common if your credit card is not attached to a checking or savings account at the same bank.

How your credit score affects your interest rate

Ideally, you should look for a credit card that offers the lowest interest rate you can find. This is easier said than done, as most cards offer interest rates in the same range. For the majority of cards, interest rates range somewhere between 15–25%.

This doesn’t mean that you cannot still find the best deal for your credit card, though. One of the most important factors that affect your credit card interest rate is your credit score. Your credit score can lead you to have an interest rate as low as 12% or one even higher than 20%.

Your credit score lets lenders and other financially interested parties know how good you are at handling credit. The score is influenced when you make financial decisions like paying debts on time, loaning money, and more.

Your credit score gives lenders an idea of how risky it would be to loan money to you. A person with a high credit score is considered less risky, so banks can trust you with low-interest rates. People with low scores, on the other hand, often end up with high-interest rates.

Interest-free credit cards

Some credit cards advertise a 0% interest rate when you purchase them. What you need to understand about these cards is that they are not totally interest-free, but rather, offer an interest free period after you first obtain them.

That means that for that promotional period, the charged interest on the card amounts to zero. Obtaining cards like these is a great option for people who are struggling financially and will not be able to pay their credit card balances plus interest.

Some credit cards offer promotional periods of zero interest for current holders, and deals like this are ideal for people who are already struggling with credit card debt. There is also the option of getting a zero interest card and transferring your balance to that card.

Balance transfers on credit cards are when cardholders move the balance from one card to another. If you have a lot of debt on one credit card that is continuing to accrue interest, you can get a zero-interest card and make a balance transfer to that card.

How Amazon uses interest saving balance

Businesses like Amazon are constantly evolving and adapting to the times. With this in mind, the company has adopted the interest saving balance concept in its business model. In this section, we will be discussing Amazon rewards and how they relate to interest saving balance.

Amazon offers fully functional credit cards in collaboration with different banking institutions such as Synchrony Bank, Citi, and Chase, with the most popular of these being Chase. With the use of these credit cards, customers can pay for items with a fixed monthly fee instead of paying the full balance in one go.

Amazon also offers payment plans that allow customers to buy items and pay for them in installments instead of paying all at once. These installment payments are charged to the customer’s registered bank card, though Amazon credit cards can also be used for these.

One of the programs available by Amazon to allow customers to pay for items over time is Monthly Payments. This payment tool is eligible for particular items and divides the entire balance payment amount into a fixed equal monthly payment amount.

Amazon Equal Pay

Amazon Equal Pay is very similar to Amazon Monthly Payments with the difference that it has a longer payment time. Not all items on Amazon are eligible for Equal Pay, so you may end up using your Amazon credit card for Equal Pay items and other items at the same time.

This may end up causing some confusion because the installment payment for your Equal Pay purchase will be charged alongside your new purchases total balance. This can confuse you because the combined balance of both can be used to charge your interest.

Amazon makes this less confusing by introducing the interest saving balance which shows you how much to pay so that you don’t end up paying interest on your new purchase. The interest saving balance includes your Equal Pay balance plus any other non-promotional balances you owe.

For example, if you used Equal Pay to buy an item worth $700 and split the payment across 7 months, then made a different purchase with your card worth $300, your total balance would be $1000.

Amazon will calculate your interest saving balance as $400, which is your equal pay installment of $100 plus your $300 purchase. This way, you won’t end up paying interest on items that you shouldn’t.


Interest saving balance is an innovative option that allows customers and credit card users to reduce their total credit balance. By paying the interest on the savings balance, you have a lower chance of reaching the credit limit on your card due to the outstanding statement balance.

Keep in mind that the best way to avoid paying interest altogether is to pay off your card on time and maintain a high credit rating.

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