We all know that we don’t pay interest on credit card purchases until after the credit card due date. But do you know why? You may answer that the credit card issuers want you to use your credit cards, so it doesn’t make sense for them to charge you interest. That is true. Most credit card issuers will provide what is called a grace period. It’s an interest-free period from the day of purchase until the statement due date.
But did you know that you can easily lose the grace period?
Losing the grace period
You can lose your grace period by carrying a balance from month to month (paying only the minimum and leaving over a balance to carry over to the next month).
Once you lose your grace period, you pay interest on every purchase you make, from the minute the new purchase posts to your account. You could just see that adding up in seconds, right? It’s a cycle. High balance, no grace period, lots of extra interest piles up, higher balance due to higher interest amounts, and you keep drowning in those balances.
Swap the card
If you have to pay interest from the date of purchase when you use a card with a balance, swap to a card that doesn’t have a balance. Firstly, you can then work on paying off the balance in an orderly manner. But more importantly, the card with no balance still has a grace period. That means that when you go and use this card to buy something, you won’t have to pay interest on it from the date of purchase and you won’t have all that extra interest to pay.
Getting back the grace period
Once you fully pay up the balance on a card then the grace period will reset. But please note, it will not reset until after the next statement prints. So once you carry a balance on a credit card even for only a month or two, stop using that card immediately. Wait a full month, meaning a full statement cycle without using the card at all. That is from before the statement prints until after the next one prints. Once that is clear, your grace period is back and you can once again use the card.
0% APR balance transfer offer
The same goes true for a card that has 0% APR only on balance transfers. Take note that if you carry a balance on that card, even if the balance is running with the 0% APR promotion, your purchases are not. And not only do your purchases not have the 0% APR promo, but they also don’t have a grace period either. Be careful to put away that card. Do not use it for any new purchases as you will be paying interest from the day of purchase.
The above is true for a card that has 0% APR only on balance transfers and not on purchases. If your card has 0% APR both on balance transfers and purchases then you don’t have this concern.
Recap
The lesson you can walk away with now is that when your credit card gets a balance that seems to be staying over a couple of months, put the card away and use a different card. You will get to keep your credit card grace period and save lots of money.
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