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Does a credit card grace period apply in this situation:

  • March 1: I charge $1000 to my card.

  • March 8: My billing cycle ends (ie, this my card's closing date). My due date is March 28th.

  • March 9: I pay off the $1000 after the closing date, but before the due date.

  • March 10: I now charge another $1000 to the card.

  • April 8: My billing cycle (for the next month) ends. Question: should I be charged interest?

In other words, if I "touch" a $0 balance between my statement date and my due date, is that sufficient to avoid interest?

Similar (but not identical) to my: How to calculate credit card interest with respect to grace period transactions?

Related to my: Credit card interest calculator with grace period & different interest rate calculation methods?

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3 Answers 3

up vote 5 down vote accepted

You shouldn't be charged interest, unless possibly because your purchases involve a currency conversion.

I've made normal purchases that happened to involve changes in currency. The prices were quoted in US$ to me. On the tail end, though, the currency change was treated as a cash advance, which accrues interest immediately.

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1  
OK, so the 20 day "grace period" applies from the statement closing date, NOT the transaction date? –  barrycarter Feb 28 '11 at 20:36
2  
Yes, that's correct. –  mbhunter Feb 28 '11 at 20:40

If I understand you correctly, no you shouldn't be charged interest. Lets say you have a billing cycle of monthly (which usually isn't true). You charge $XX per day, ending up at $1000 at the end of January. So February 1st, your bill for your January billing cycle is $1000, due by Feb 15th (lets say).

On February 1st, you continue to charge $XX per day. You go to pay your bill online on Feb 14th (to be safe), and you'll usually see on your credit card website something like:

  • Current balance: $1495 (or wherever you are at the time)
  • Latest statement balance: $1000
  • Minimum due: $42.75

You'd hit "Pay my bill", and you'd usually see these options:

  • Pay current balance of $1495
  • Pay latest statement of $1000
  • Pay minimum amount of $42.75
  • Pay other amount (input box)

At the date your cycle was due (Feb 15th), if you haven't paid your full latest statement (lets say you paid $500), they will charge you interest on the entire balance for the period (so interest on $1000, or lets say $50). The other $500 will roll over to the next month, so your next month you'd be somewhere near a $1550 bill.

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OK. But if I pay $1000 on Feb 14th, there's no interest, even though my balance on Feb 14th is $1495, not $1000, correct? –  barrycarter Feb 28 '11 at 20:35
    
Correct, to determine if you've completely paid off your bill, they only care about the balance on your statement, not your current balance. –  Ceberon Mar 1 '11 at 18:01

This will not result in any finance charges:

  • March 1: Charge $1000
  • March 10: Charge $1000
  • March 28: Pay $1000
  • April 28: Pay $1000

I wouldn't recommend cutting it quite so close, but as long as you pay the full balance as shown on each statement by the due date shown on that same statement, you won't incur a finance charge.

Of course this only applies in the case of ordinary purchases that have a grace period.

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