The Secret to Free Credit
Credit card companies make billions on interest, but savvy consumers use credit cards for years, collecting rewards and enjoying fraud protection, without ever paying a single penny in interest. The secret lies in the grace period.
Understanding the Grace Period
Most credit cards offer a 'grace period' of 21 to 25 days between the end of your billing cycle and your payment due date. If you pay your Statement Balance in full by the due date, you are charged zero interest on your purchases.
The Number One Rule
Ignore the "Minimum Payment" box on your bill. To avoid interest, you must pay the "Statement Balance" completely. If you leave even $1 unpaid, you lose your grace period, and interest is retroactively applied to your average daily balance.
Exceptions to the Rule
Cash advances (using your credit card at an ATM) almost never have a grace period. Interest begins accumulating the second the cash leaves the machine. Furthermore, if you are currently carrying a balance from a previous month, you have already lost your grace period, and new purchases will accrue interest immediately.