Home > Credit Cards > The Trick That Can Help You Avoid Credit Card Interest for 2 Months

Comments 0 Comments

Credit card issuers are very upfront with the features that attract new customers. Things like signup bonuses, category bonuses, or special financing are essentially marketing tactics to drive new business. What card issuers are not always the best at doing, is explaining everything you can find in the fine print. These are the things that can have a big impact on your finances.

Grace periods have long been used within the credit card industry, but most people don’t really understand what they are and how they can work for you or against you. Understanding how credit card companies use grace periods can mean the difference in hundreds if not thousands of dollars in interest out of your pocket each year.

What Is a Grace Period?

A grace period is the time from when your credit card billing statement closes until when your payment is due. This is usually anywhere from 21 to 27 days. To help you understand this a little more, let’s look deeper into how credit card billing cycles work.

Each month, when you receive your credit card statement, in addition to the bill’s due date, you will see a date that is generally labeled as the “statement date” or “closing date”. What the card company will do is total all the purchases made from the previous closing date to the current closing date and bill you for them. Let’s assume your statement’s closing date is November 7, any purchase that you make on November 8 or after will be part of the next billing cycle.

During this grace period, you’re not going to be paying interest. Think of it like your credit card company extending you a complimentary line of credit for a few weeks. However, if you do either of the following two things, interest will start accruing immediately:

  • You only pay a portion of the total amount due by the due date.
  • You pay the entire balance, but only after the due date has passed.

If this happens to you, it’s important to know that interest won’t just start accruing from the statement’s due date, it will actually accrue all the way back to the purchase dates of each item.

A Two-Month Grace Period? 

Now that you know exactly what the grace period is, what if someone told you that you could extend it to nearly two months? It’s possible and not all that difficult to accomplish. Plus, if you are planning to make a large purchase and want to little extra time to pay off the balance, then this could be an extremely useful tactic.

Because your credit card billing month starts over the day after your statement closes, the trick it to make your purchases as close to that date as possible. Let’s say that your statement closed on November 2 and you bought a new television on November 3. Your next statement, which includes the television purchase, would close on December 2 and you would have a due date of approximately December 23. That means you would have nearly two months from the time you bought your new television until when you would face possible interest on the purchase. (Note: If you’re looking to avoid interest for a longer period of time, you might want to consider a balance transfer credit card.)

Smart Charging

Remember, while the strategy can be helpful in avoiding interest on a big purchase, it’s not an excuse to overspend. Credit cards are best leveraged when they’re paid off in full by each due date. Otherwise, as we mentioned, you’ll start to accrue interest, which can add up quickly, damaging your overall financial health and your credit. (The amount of debt you owe plays a major role among credit scores. You can see how your debt levels are affecting your credit by viewing your free credit report snapshot, updated every 14 days, on Credit.com.)

Also, anyone looking to properly manage their debt needs to have a good understanding of grace periods. Credit card companies are not required to have a grace period and some do not. If they do, the CARD Act of 2009 requires your statement must be mailed or delivered to you at least 21 days before the due date. Make sure you read the fine print for your credit card so that you can fully understand how your card works and what actions may nullify your grace period, if you do have one. It could save you a lot of money in the long run.

Image: bowdenimages

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other sponsored content on Credit.com are Partners with Credit.com. Credit.com receives compensation if our users apply for and ultimately sign up for any financial products or cards offered.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.



Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team