Clear example of credit card balance 55 days interest-free “trick”?
"Well, I answered a very similar question ""Credit card payment date"" where I showed that for a normal cycle, the average charge isn't due for 40 days. The range is 35-55, so if you want to feel good about the float just charge everything the day after the cycle closes, and nothing else the rest of the month. Why is this so interesting? It's no trick, and no secret.  By the way, this isn't likely to be of any use when you're buying gas, groceries, or normal purchases. But, I suppose if you have a large purchase, say a big TV, $3000, this will buy you extra time to pay. It would be remiss of me to not clearly state that anyone who needs to take advantage of this ""trick"" is the same person who probably shouldn't use credit cards at all. Those who use cards are best served by charging what they can afford to pay at that moment and not base today's charges on what paychecks will come in by the due date of the credit card bill." "There are always little tricks you can play with your credit card. For example, the due date of your statement balance is not really set in stone as your bank would like you to believe. Banks have a TOS where they can make you liable to pay interest from the statement generation date (which is a good 25 days before your due date) on your balance, if you don't pay off your balance by your due date. However, you can choose to not pay your balance by your due date upto 30 days and they will not report your late payment to credit agencies. If they ask you to pay interest, you can negotiate yourself out of it as well (although not sure if it will work every-time if you make it a habit!) Be careful though: not all banks report your credit utilization based on your statement balance! DCU for example, reports your credit utilization based on your end-of-the-month balance. This can affect your short term credit score (history?) and mess around with your chances of pulling off these tricks with the bank CSRs. These ""little tricks"" can effectively net you more than 60 days of interest free loans, but I am not sure if anyone will condone this as a habit, especially on this website :-)" "I think this stuff was more valid when grace periods were longer. For example, back in the 90's, I had an MBNA card with a 35 day grace period. Many business travellers used Diner's Club charge cards because they featured a 60 day grace period. There are valid uses for this: As JoeTaxpayer stated, if you are benefiting from ""tricks"" like this, you probably have other problems that you probably ought to deal with."
I've got a card that I've had for about 25 years now.  The only time they charged me interest I showed it was their goof (the automatic payment failed because of their mistake) and they haven't cancelled it.  No annual fee, a bit of cash back. The only cards I've ever had an issuer close are ones I didn't use. some of that article is misleading, some of it is just plain wrong. Very wrong... like you end up drawing an incorrect conclusion type wrong.  Corporate transaction accounts, whose balances are up recently due to TAG (expires 12/31), are subject to reserve requirements.  When you purchase something with a credit card, the bank's asset of your credit increases and the bank's asset of cash decreases (it goes wherever you purchased).  There is no change to your deposit account and no change to reserves.  The incoming bank's cash account and liability account associated with that business transaction account increase, and it is trivial to transfer the % of cash necessary to reach minimum reserve requirements to the Fed.  Secondly, anyone with a smidgen of accounting can tell that his balance sheet won't balance. As Joe mentioned, you can carry a balance on your credit card for some grace period (typically 1 month). You will not be charged any interest if you pay your balance at the end of the grace period. I think of it as a way to get liquid immidieately for making purchases. For example, you want to make a large purchase but your funds are in some investment account which might take ~1 week to get to you. You can use the credit card to make the purchase and use that grace period to move your money from investments to checking account and pay for your purchase (without paying anything extra). This helps you keep your money invested and not having to keep large amounts in checking/savings account, which does not generate any returns. I have a CapitalOne credit card, and every two or three weeks, CapitalOne Bank sends me checks that can be used almost anywhere (including a deposit into my own checking account if I wish, or to pay taxes or utility bills etc)). The amount thus borrowed is counted as a balance transfer (as if I  were paying off another credit-card balance) and it will be charged 0% interest for a year.  The catch is that unless I pay off the next monthly statement in full by the due date, I will be charged interest on all new purchases from the day that they post to the account till the day they are paid off. No more grace period etc.  All this will continue until that loan amount is paid off in full.  So, I either would have to (i) pay off all the purchases made this month plus the minimum monthly payment shown on the next monthly statement and give up use of the card till that 0% balance is all repaid, or (ii) pay interest on new purchases.   It might be worth checking on the CapitalOne Credit Card site if such an offer is available to you.  If so, get a check from them, pay off the invoice using that check (actually, I would strongly recommend depositing the money in your local bank and writing them your personal check for the amount to be paid), and then pay off next month's bill in full, etc. "This question has been absolutely perplexing to me.  It has spawned a few heated debates amongst fellow colleagues and friends. My laymen understanding has provided me with what I believe to be a simple answer to the originator's question.  I'm trying to use common sense here; so be gentle. FICO scores, while very complex and mysterious, are speculatively calculated from data derived from things like length of credit history, utilization, types of credit, payment history, etc. Only a select few know the actual algorithms (closely guarded secrets?).  Are these really secrets? I don't know but it's the word on the street so I'm going with it! Creditors report data to these agencies on certain dates- weekly, monthly or annually.  These dates may be ascertained by simply calling the respective creditor and asking.  Making sure that revolving credit accounts are paid in full during the creditors ""data dump"" may or may not have a positive impact on ones FICO score. A zero balance reported every time on a certain account may appear to be inactive depending on how the algorithm has been written and vice versa; utilization and payment history may outweigh the negativity that a constantly zero balance could imply. Oh Lord, did that last sentence just come out of my head? I reread it four times just make sure it makes sense. My personal experience with revolving credit and FICO I was professionally advised to: Without any other life changing credit instances- just using the credit card in this fashion- my FICO score increased by 44 points.  I did end up paying a little in interest but it was well worth it. Top tier feels great! In conclusion I would say that the answer to this question is not cut and dry as so many would imply. HMMMMM" "@Joe's original answer and the  example with proportionate application of the payment to the two balances is not quite what will happen with US credit cards. By US law (CARD Act of 2009), if you make only the minimum  required payment (or less), the credit-card company can choose which part of the balance that sum is applied to. I am not aware of any company that chooses to apply such payments to anything other than that part of the balance which carries the least interest rate  (including the 0% rate that ""results"" from acceptance of balance transfer  offers). If you make more than the minimum required payment, then the excess must, by law, be applied to paying off the highest rate balance. If the highest rate balance gets paid off completely, any remaining amount must be applied to second-highest rate balance, and so on.  Thus, it is not the case that that $600 payment (in Joe's example) is applied proportionately to the $5000 and $1000 balances owed. It depends on what the required minimum payment is. So, what would be the minimum required payment? The minimum payment is the total of (i) all finance charges incurred during that month, (ii) all service fees and penalties (e.g. fee for exceeding credit limit, fee for taking a cash advance, late payment penalty) and other charges (e.g. annual card fee) and (iii) a fraction of the outstanding balance that (by law) must be large enough to allow the customer to pay off the entire balance in a reasonable length of time. The law is silent on what is reasonable, but most companies use 1% (which would pay off the balance over 8.33 years).  Consider the numbers in Joe's example together with the following assumptions: $5000 and $1000 are the balances owed at the beginning of the month, no new charges or service fees during that month, and the previous month's minimum monthly payment was made on the day that the statement paid so that the finance charge for the current month is on the balances stated). The finance charge on the $5000 balance is $56.25, while the finance charge on the $1000 balance is $18.33, giving a minimum required payment of $56.25+18.33+60 = $134.58. Of the $600 payment, $134.58 would be applied to the lower-rate balance ($5000 + $56.25 = $5056.25) and reduce it to $4921.67. The excess $465.42 would be applied to the high-rate balance of $1000+18.33 = $1018.33 and reduce it to $552.91. In general, it is a bad idea to take a cash advance from a credit card. Don't do it unless you absolutely must have cash then and there to buy something from a merchant who does not accept credit cards, only cash, and don't be tempted to use the ""convenience checks"" that credit-card companies send you from time to time. All such cash advances not only carry larger rates of interest (there may also be upfront fees for taking an advance) but any purchases made during the rest of the month also become subject to finance charge. In other words, there is no ""grace period"" for new charges, and this state of affairs will last for one month beyond the first credit-card statement whose statement is paid off in full in timely fashion. Finally, turning to the question asked, viz. "" I am trying to determine how much I need to pay monthly to zero the balance, ...."", as per the above calculations, if the OP makes the minimum required payment of $134.58 plus $1018.33, that $134.58 will be applied to the low-rate balance and the rest $1018.33 will pay off the high-rate balance in full if the payment is made on the day the statement is issued. If payment is made later, but before the due date, that $1018.33 will be accruing finance charges until the date the payment is made, and these will appear as 22% rate balance on next month's statement. Similarly for the low-rate balance. What if several monthly payments will be required? The best calculator known to me is at https://powerpay.org (free but it is necessary to set up a username and password).  Enter in all the credit card balances and the different interest rates, and the total amount of  money that can be used to pay off the balances, and the site will lay out a payment plan.  (Basically, pay off the highest-interest rate balance as much as possible while making minimum required payments on the rest). Most people are surprised at how much can be saved (and how much shorter the time to be debt-free is) if one is willing to pay just a little bit more each month." Credit cards come with an interest-free grace period of ~25 days as long as you pay your balance in full every month. In other words, charges made in January will appear on a bill cut on Jan 31, and due around the 25th of February. If paid in full by 2/25, there's no interest. It is a very good idea to get in the habit of paying off your entire balance every month for this very reason. Don't buy anything you can't afford to pay for at the end of the month when the credit card bill is due. You'll avoid interest charges, build good habits, and improve your credit score. By just paying the minimum amount due, you'll be charged interest from the moment of purchase, and the grace period on new purchases goes away. Credit card companies make the minimum amount due relatively low as a way to encourage you to pay more and more in interest every month. Don't fall for it! Look for a credit card with zero annual fee. Sure, rewards are nice, but it's more important to avoid fees, keep the interest rate low, and get in the habit of paying in full every month, in which case the interest rate won't matter. Your bank or credit union is a good place to start looking. "This is most likely protecting Square's relationship with Visa/Mastercard/AMEX/etc. Credit card companies typically charge their customers a much higher interest rate with no grace period on cash advances (withdrawals made from an ATM using a credit card). If you use Square to generate something that looks like a ""merchandise transaction"" but instead just hand over a wad of banknotes, you're forcing the credit card company to apply their cheaper ""purchases"" interest rate on the transaction, plus award any applicable cashback offers†, etc. Square would absolutely profit off of this, but since it would result in less revenue for the partner credit card companies, that would quickly sour the relationship and could even result in them terminating their agreements with Square altogether. † This is the kind of activity they are trying to prevent:  1. Bill yourself $5,000 for ""merchandise"", but instead give yourself cash.  2. Earn 1.5% cashback ($75).  3. Use $4,925 of the cash and a $75 statement credit to pay your credit card statement.  4. Pocket the difference.  5. Repeat. Note, the fees involved probably negate any potential gain shown in this example, but I'm sure with enough creative thinking someone would figure out a way to game the system if it wasn't expressly forbidden in the terms of service" "These days, just about any bank has the ability to schedule payments for free.  I usually use this.  My wife has a Chase MasterCard, because they used to automatically credit the 1% cash back monthly.  Now they ""improved"" the card, and you need to go online and redeem the rewards, either in $20 increments, or to pay off a previous purchase, which seems to be a real gimmick.  They probably get back the 1% cash back for that purchase if you use this feature.  Weird people." I actually just did that with my Chase Freedom card. They rotate categories every 3 months, and from April-June it was 5% back at grocery stores.  So I bought a ton of gas cards and got my 5% back.  Next I figured out I would be clever and buy a ton of store gift cards (grocery gift cards) right at the end of the quarter, then use those in the future to purchase gas cards.  Well, I just tried that a couple days ago and discovered the store refuses to sell a gift card if you're paying with a gift card!  So now I'm stuck with $1,000 in grocery cards until I use them in actual grocery purchases haha One of the things about this grocery store is they partner with a gas station on their rewards program.  They offer 10 cents off a gallon with every $100 spent in store, and they double it to 20 cents off a gallon if you buy $100 in gift cards.  Then on the back of the receipt is a coupon for 10 cents off per gallon -- which they double on Tuesdays.  Unfortunately I think I'm one of the only people that takes this much advantage of the program  :-/ Side note: I actually just changed the billing cycle of my Chase Freedom card to end on the 24th of the month.  That way I can charge a bunch of rewards in the final 6-7 days of the quarter.  And if I have a $0 balance on the 24th, my bill isn't due for 7 weeks -- interest free!  And Chase Freedom has never cared if you purchase gift cards with their quarterly rewards program.  I also gave them a courtesy email giving the specific store and $$$ amount that was going to be charged, and of course they still called me with a 'fraud alert'... I don't know about India, but here in the US banks, and more friendly institutions such as credit unions, use to offer the option of a 'secured' credit card where the card was secured by placing a lock on money in a savings account equal to the credit limit on the card. So for example, if you had $1500 in savings, you could have them lock say $1000, which you would not be able to withdraw from savings, in return for a credit card account with a credit limit of $1000.  Typically you still earned interest on the full amount of the savings, you were just limited to having to maintain a minimum balance in that account of $1000. "I'm not sure if this answer is going to win me many friends on reddit, but here goes...  There's no good reason why they couldn't have just told him the current balance shown on their records, BUT...  **There are some good reasons why they can't quote a definitive ""payoff"" balance to instantly settle the account:**  It's very possible to charge something today, and not have it show up on Chase's records until tomorrow, or Monday, or later. There are still places that process paper credit-card transactions, or that deal with 3rd-party payment processors who reconcile transactions M-F, 9-5ish, and so on.   - Most transactions these days are authorized the instant you swipe the card, and the merchant won't process until they get authorization back from the CC company. But sometimes those authorizations come from third-party processors who don't bill Chase until later. Some of them might not process a Friday afternoon transaction until close-of-business Monday.   - Also, there are things like taxicab fares that might be collected when you exit the cab, but the record exists only in the taxi's onboard machine until they plug it into something else at the end of the shift.   - There are still some situations (outdoor flea-markets, auctions, etc) where the merchant takes a paper imprint, and doesn't actually process the payment until they physically mail it in or whatever.   - Some small businesses have information-security routines in place where only one person is allowed to process credit-card payments, but where multiple customer service reps are allowed to accept the CC info, write it down on one piece of paper, then either physically hand the paper to the person with processing rights, or deposit the paper in a locked office or mail-slot for later processing. This is obviously not an instant-update system for Chase. (Believe it or not, this system is actually considered to be *more* secure than retaining computerized records unless the business has very rigorous end-to-end info security).   So... there are a bunch of legit reasons why a CC company can't necessarily tell you this instant that you only need to pay $x and no more to close the account (although there is no good reason why they shouldn't be able to quote your current balance).   What happens when you ""close an account"" is basically that they stop accepting new charges that were *made* after your notification, but they will still accept and bill you for legit charges that you incurred before you gave them notice. So basically, they ""turn off"" the credit-card, but they can't guarantee how much you owe until the next billing cycle after this one closes:  - You notify them to ""close"" the account. They stop authorizing new charges.   - Their merchant agreements basically give the merchant a certain window to process charges. The CC company process legit charges that were made prior to ""closing"" the account.   - The CC company sends you the final statement *after* that window for any charges has expired,  - When that final statement is paid (or if it is zero), *THAT* is when the account is settled and reported to Equifax etc as ""paid"".   So it's hard to tell from your post who was being overly semantic/unreasonable. If the CC company refused to tell the current balance, they were just being dickheads. But if they refused to promise that the current balance shown is enough to instantly settle the account forever, they had legit reasons.  Hope that helps." "In addition to all the points made in other answers, in some jurisdictions (including the UK where I live) the consumer credit laws require the lender to allow the borrower to pay off the loan at any time. If the lender charges interest and the borrower pays off the loan early then the lender loses the interest that would have been paid during the rest of the loan period. However if the actual interest is baked into the sale price of an item and the loan to pay for it is nominally ""0%"" then the borrower still pays all the interest even if they pay off the loan immediately. If you think this game is being played then you can ask for a ""cash discount"" (or similar wording: I once had problems with a car salesman who thought I meant a suitcase full of used £20s), meaning you want to avoid paying the interest as you are not taking a loan." "I too am a full-monthly-statement-balance payer and I received a balance transfer offer from my credit-card company. This one was quite different from many others that I have read about on this forum. I could do a balance transfer for any amount up to $X from another credit card, or use the enclosed ""checks"" to pay  some other (non-credit-card) bills, and I would not have to pay any interest for 12 months on the amount thus borrowed.  But, There would be a 2% service charge on the amount I was borrowing. This amount would be billed on the next monthly statement, and it would have to be paid in full by the due date of that month's payment, that is, within the 25-day grace period allowed for payment of monthly statements. Else, interest would start being charged on the unpaid part of the service charge at the usual humongous rate of H% per month. If I had not paid the previous month's balance in full, I would be charged interest at H% per month on the service charge starting from Day One; no free ride till the due date of the next month's statement. Of course, the balance carried over from last month would also be charged interest at H%. If I had paid last month's bill in full, but there were any other charges (purchases) during the current month, then  unless the entire amount due, this month's purchases plus service charge and that ""interest-free-for-twelve-months loan""  balance was paid off within the 25-day grace period, my purchases would be deemed unpaid and would start being charged interest. In short, the only way to avoid paying interest on the amount borrowed was to start with a card showing a $0 balance due on the previous month's statement, not make any charges on that card for a whole year, and pay off that 2% service charge within the grace period. It might also have required that one-twelfth of that interest-free loan be repaid each month, but  I had stopped reading the offer at this point and filed it in the round circular file. In short, while @JoeTaxpayer's tale of how ""As a pay-in-full user, I've used the zero rate to throw $20K at the 5.25% mortgage"" is undoubtedly how things worked once, it is not at all clear that they still work that way. At least, they don't work that way for me.  Heck, once upon a time, for a period of about 3 months, you could earn 1.5% interest per month from the credit card company by overpaying your credit card bill considerably. Their computers then just ""added on"" 1.5% interest by multiplying your credit balance -$X by 1.015 and so you got 1.5% per month interest from the credit card company. The credit card agreements (and the software!) got changed in a hurry, and nowdays all credit-card agreements state in the fine print that if you overpay your bill, you don't earn any interest on the overpayment." No. There is no incentive for the card issuer to permanently loan you money for free (Even though they make a small amount of money with every transaction). Yes, there are many credit cards that offer introductory 0% APR, often lasting for a year, some even two years. In theory, you could keep applying for new cards with these terms, and continually transfer the balance to the new card (Though you would probably incur a fee for doing so).