BACK

Credit Smart

Know closing date to maximize your interest-free grace period

Summary

Do you hate paying credit card interest? Know your card account’s closing date

The editorial content below is based solely on the objective assessment of our writers and is not driven by advertising dollars. However, we may receive compensation when you click on links to products from our partners. Learn more about our advertising policy.

The content on this page is accurate as of the posting date; however, some of the offers mentioned may have expired. Please see the bank’s website for the most current version of card offers; and please review our list of best credit cards, or use our CardMatch™ tool to find cards matched to your needs.

Question

Dear Credit Smart,
Paul’s credit card closes on the ninth of the month, and his payment is due on the 30th. If Paul purchases a stereo for $300 June 12, how many interest-free days will he have? When will he have to pay for the stereo in full in order to avoid finance charges? – Frank

Answer

Dear Frank,
Your question brings up a money-saving tip a lot of people can use.

If you want to maximize your grace period – the interest-free period enjoyed by those with no balances – you need to know your credit card account’s monthly closing date. By knowing the closing date, you can increase the number of days you can use the bank’s money for free.

Here is the general rule:

  • Credit card purchases just before the closing date have only a short grace period.
  • Credit card purchases just after the closing date enjoy a long grace period.

That is information that could come in handy if you have a big purchase you need to make but may not have the money to pay it all off immediately. By making the purchase right after the closing date, you lengthen your grace period. In that extra time, an extra paycheck or two may roll in before the debt comes due.

Your question illustrates the point. By purchasing the stereo June 12, only a few days after his credit card’s monthly closing date, Paul gets almost 50 days to pay off his purchase interest-free.

The actual number of interest-free days would be 49, if we count the day he purchased the stereo (June 12) and the day his payment is due (July 30).

Had Paul bought the stereo June 8, the day before the monthly closing date, he would have a mere 23 days to pay it off interest-free, since the payment for this purchase would be June 30.

While it is true that one month’s interest on $300 is not significant, even if you have a high-interest card, you should avoid paying more than you have to. If Paul cannot pay the full amount due June 30, he will probably incur $5 to $10 in interest charges if he can pay it off July 30. However, if Paul chooses to take the maximum time to pay off the purchase, this amount will grow. The minimum payment on a $300 balance would only be around $25, but would take 14 months to pay off and cost an additional $28 assuming the March 2017 average credit card interest rate of 15.50 percent.

I want you to be aware of your purchasing power when it comes to getting the most for your money. If you are contemplating a large purchase using a credit card, know when your card closes for the month. By doing what Paul did and putting off the purchase until just after that date has passed, you will buy yourself almost an extra month to come up with the funds needed to pay the purchase off interest-free.

My advice for using credit cards is to try to charge only those purchases that you can afford to pay off by the end of the grace period. While I know that this is not always possible, being aware of your grace period and using it to your advantage is simply a good financial practice. When it is not possible, try to pay as much as you can every month over the minimum to reduce both the interest you will pay and the amount of time it will take you to pay off.

Remember to always use your credit smarts!

See related: How to use your grace period to avoid interest

What’s up next?

In Credit Smart

Can I lose my house over credit card debt?

Probably not, but ignoring debt will just make things worse

Published: February 25, 2017

See more stories
Credit Card Rate Report Updated: April 21st, 2019
Business
15.32%
Airline
17.50%
Reward
17.56%
Cash Back
17.60%
Student
17.79%

Questions or comments?

Contact us

Editorial corrections policies

Learn more

Join the Discussion

We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

The editorial content on CreditCards.com is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company’s business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.