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I am beginning to build credit and got a credit card a few months ago, I am a little confused about when a payment should be made in order to avoid any late fees/penalties/interest. Here is a situation with made up numbers/dates:

Statement 1:

Statement Date: 09/05/2010
Payment Due: 10/02/2010
Min. Pmt. Due: $15.00
Statement Balance: $50.00

The following day on 09/06/2010 I charged $100.00 onto the card which appeared on the website immediately, however the next statement will not go out until 10/05/2010.

On 09/24/2010 I paid the $50.00 balance from the first statement well before the due date.

I still have a $100.00 balance on the card, which I assume will be displayed on the 2nd statement and I will have until 11/02/2010 to pay it off in order to avoid all late fees/penalties/interest.

Is this true?

Now, if I understand this correctly, wouldn't it be logical to avoid paying basically as long as possible (as long as I do pay the card off in full before the due date)?

*EDIT*

I feel as though I might not have been clear enough by the answers which I have received.

I am paying the credit card in full at the end of each cycle, but am confused. If I receive a statement on the 5th of the month and it says pay by the 2nd of NEXT month, then do I simply have to pay off the total amount which is shown on THAT statement in full in order to avoid the interest?

The reason I am confused is if I put something on the card very soon after I receive the statement, say the next day, it actually won't appear until the following statement, and won't be paid off until 30+ days after I made the purchase.

I feel as though the confusing factor is viewing my current balance online instead of simply waiting for the statement each month.

  • 3
    You are correct: the confusing factor is from looking at the balance online. Pay the full balance, before the due date, and you will not incur interest charges. – bstpierre Sep 29 '10 at 0:18
  • Thank you, this is exactly what I expected the answer was, post as an answer and I will accept. – evolve Sep 29 '10 at 0:38
4

You need to pay the statement balance before the due date to avoid interest and penalties.

If you pay more than the statement balance (to cover some of the charges you made during the current statement's grace period) then those excess charges will reduce the balance due on the next statement.

  • I'd recommend making any electronic bill payment 5 days before the bill is due. My banks transfers take a few days to officially enter the system, and while it's now illegal for consumer credit cards to have statements due on weekends, they can still charge interest over a weekend if your payment doesn't clear on Friday. – SpecKK Sep 30 '10 at 17:36
  • By setting up automatic payments through my CC company's web site, I can specify pay full amount on due date, and then how long it actually takes the credit union (in my case) and the CC co. to shove the money around isn't my problem. – kajaco Oct 1 '10 at 16:26
7

Your understanding is correct - you basically have to pay the minimum payment given on the statement before the due date in order to avoid just fees or penalties and the full statement balance if you also want to avoid paying interest (which IMHO is the smart thing to do).

1

I sense in your question that you're asking "how much credit can I get for free and for how long?".

I feel that this is a dangerous path to tread if you don't already understand what debts you're incurring. If you only pay off the minimum amount, you will never pay off your debts. A credit card company has no incentive to tell you this, but there are laws compelling them to instruct you to make some kind of repayments.

As Timo says, pay off your credit cards in full each month - set up whatever automatic mechanism they allow to do this. Getting behind with credit card payments is a downward spiral.

0

Statement balance is what you owe to satisfy the debt. It gets more complicated once you stop paying in full.

0

Pay the full balance before the due date and you are not late. You will pay interest on any balance you have after the due date.

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