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I recently got my first credit card and after calling the bank, the lady on the phone was not able to clarify my questions (weird, huh?). Maybe you can help me understand the following scenario:

Let's say that I set up for full payment at due date (as mentioned on the online bankng website) and the due date is 12/9.

  1. If I make a payment on 12/8, do I get just one day of interest free loan and do I have to pay it back in the next day?
  2. Is my logic correct: if I make a payment just after the due date, I get a 0-interest loan longer than if I make it in the middle of the payment cycle?
  3. How is the full payment calculated? Sometimes, after making a payment, I see it in pending transactions - this means that my max credit limit decreased a little but the paymeny ammount is not yet updated.
  4. Can the due date of a credit card be changed? Currently it is set two days before my salary date which is a little inconvenint...

Adding one more scenario:

  1. Assume again the due date 12/9. Let's say that today is 12/1 and I have a balance of -$300. If I make a full payment at that date and then, in the next day, make a purchase of $300, do I still have to pay $300 at on the 9th or I get another 30 days for the loan? Is a full payment reseting the billing cycle?

If it makes any difference, the bank is FirstTech.

Thanks, Ankur

  • Guessing FirstTech is the First Tech Federal Credit Union in the US, so updating the tag to reflect the location. – littleadv Dec 9 '11 at 23:37
  • That's correct, @littleadv – Ankur S Dec 9 '11 at 23:42
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In general: you owe the money once the transaction is posted. You're requested to pay what you owe (at least the minimum payment) by the due date. If you don't pay in full everything you owe by the due date, you'll be charged interest starting of the statement closing date (for cash advances - you're going to be charged interest and finance fees according to a different set of rules, usually starting of the date of the advance).

You usually have about 20-28 days between the statement closing date and the due date, during which you must pay at least the minimum payment, or in full to avoid being charged interest.

Answers:

If I make a payment on 12/8, do I get just one day of interest free loan and do I have to pay it back in the next day?

If the due date is 12/9, and you pay in full on 12/8, you get a free loan from the date of the closing till the due date. Once you're past due (if you don't pay by 12/9), not only you're going to be charged interest, but also late fees.

Is my logic correct: if I make a payment just after the due date, I get a 0-interest loan longer than if I make it in the middle of the payment cycle?

No, if you don't pay at least the minimum payment by the due date - you're going to be charged late fees and interest. If you're not paying in full by the due date - you're going to be charged interest starting from the closing date of the statement.

How is the full payment calculated? Sometimes, after making a payment, I see it in pending transactions - this means that my max credit limit decreased a little but the paymeny ammount is not yet updated.

Full payment is the full amount you owed at the time the statement closed. Pending transactions affect your credit limit, but you don't owe the money until they're posted.

Can the due date of a credit card be changed? Currently it is set two days before my salary date which is a little inconvenint...

Depends on your bank. Some banks allow changing it, some don't.

edit to answer the additional question:

Assume again the due date 12/9. Let's say that today is 12/1 and I have a balance of -$300. If I make a full payment at that date and then, in the next day, make a purchase of $300, do I still have to pay $300 at on the 9th or I get another 30 days for the loan? Is a full payment reseting the billing cycle?

Any purchase posted after the statement is closed will need to be paid by the due date of the next statement, in which it will appear. I.e.: in your scenario, if you pay your balance in full, you're good. Any purchase after the statement is closed will be reflected in the next statement, and you will have to pay it before the next due date.

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    +1 for a clear breakdown with effective use of boldface, but one addition: some (most?) banks will charge you interest from the day of purchase if you maintain a balance. So the only way to get a "zero interest loan" is to pay the balance in full each month (by the due date). – kdgregory Dec 10 '11 at 13:37
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The way my most-used card is set up, the cycle ends on the 14th of the month. I can see the bill on line of course, but it typically arrives on the 20th or so with a payment due on the 11th. The 'free ride' is the period from the first charge on the 15th right till it's paid nearly two months later.

To be clear, on a brand new cycle, I will start to charge on January 15th, the cycle then ends Feb 14th with charges on that bill due March 11th. The average age of the charges is about 40 days, I don't understand where you reference just one free day's interest float. (This about this, the mid point between Jan 15 and Feb 14 is Jan 30, so the cycle is a full month plus 11 days or about 40 days float)

Are you paid monthly or semi-monthly? That's unusual, the more common pay cycles are every two weeks or every week, in which case no credit card due date is ideal as there would be 12 card cycles to 26 or 52 checks. If you are paid on a monthly type basis, yes, it can't hurt to call the card and ask to change your statement period. But also consider, most advisors caution to never charge what you don't already have the cash to pay for. If you need your next check to pay a credit call bill, you are by definition, overspending.

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