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First of all, I am a resident of Canada.

I am new to credit cards, so I hope my question makes sense. I've had my card for a few months ago and I've always paid the balance in full by the time the due date rolls around. Just out of curiosity, say the day after tomorrow was my due date. If I made a purchase tomorrow and didn't pay it off by the day after tomorrow, would I be charged any interest on it? Is there any negative ramifications at all for doing this?

Thanks.

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At JoeTaxpayer's suggestion, here's a graphical representation. Blue is the statement period (so the period in which you actually buy stuff) and green is the grace period, which you can think of as the pay-off period. Typically the end of the grace period coincides with your due date on your statement. The labels on the left of the bar is start of the statement period, the right is the end of the grace period, and on top is the end of the statement period (and start of the grace period) - which is the date your bill should be mailed to you (or within a day or two, required to be 21+ days before the end of the grace period). This assumes a 1 month billing cycle and a 25 day grace period (shifted forward for weekends).

Basically, anything you purchase in a blue period, if you then pay it off by the end of the green period you don't owe interest on it [assuming you had done so the previous month as well - for some cards it takes two months of doing this to get back to interest-free-land]. (You can also pay in the blue period, of course.)

Note: this is only for CCs with grace periods. That is not required by law in the US, though it is extremely common; nearly all major US CCs have grace periods (the only ones I've found that do not are store cards). Canada seems to require this by law.

Graphical representation of CC grace periods

  • A year late, but thanks, that's exactly what I was thinking. – JoeTaxpayer Oct 26 '16 at 22:42
  • @JoeTaxpayer and here is a perfect example of a question and good answer that could be added to the FAQ on meta.money.se. Can't do it myself from my cellphone..... – Dilip Sarwate Oct 27 '16 at 13:25
  • Neither can I . 😳 whoever gets to a real computer first can do it. – JoeTaxpayer Oct 27 '16 at 13:41
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Generally, no, you would not be charged interest. The reason for this is the concepts of the billing period and the grace period.

The billing period is a month-long period that your monthly statement covers. For example, my credit card billing period ends on the 16th of each month. So my last statement covered all transactions between May 17 and June 16.

The grace period is the amount of time between the billing period end date (also called statement date) and the due date. On my credit card, the grace period listed in the terms is at least 25 days. In actuality, my due date is on the 13th of each month, which gives me a grace period of about 27 days (more or less, depending on how many days are in the month). The payment for my most recent statement is due on July 13. If I pay my entire statement balance by that due date (and I always do), I won't pay any interest.

If I make a credit card purchase on July 12, the day before my payment due date, that purchase will be on next month's statement, which covers the billing period June 17-July 16. The payment for that purchase will be due on August 13.

  • 2
    +1 I am thinking there's an opportunity to take the dates and format to a chart/ graph showing the cyclic process, highlighting the gap when charges aren't due till a future bill is cut. – JoeTaxpayer Jul 3 '15 at 14:20
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Check the terms of your card. Typically, for most purchases (as opposed to cash advances) you have several weeks after the bank bills you for your purchases in which to pay that bill in full to avoid interest. In your scenario, the new charge will appear on the next bill, which means that as long as you pay that bill before its due date you will probably be fine.

But the terms may differ from card to card (even when the cards were issued by the same bank), so do check the paperwork your bank sent you or ask your bank if you need clarification. My credit card statements include a brief summary of the terms applicable to my card every month; I don't know how common that is.

protected by Chris W. Rea Oct 27 '16 at 12:02

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