Your credit card issuer will charge interest whenever you carry a balance beyond the grace period. Credit card interest isn’t a one-time thing either. Each month you carry a balance over from the previous month, you’ll have a finance charge added to your balance.
When You’re Charged Credit Card Interest
You’ll be charged interest whenever you don’t pay the full balance from the previous billing cycle. For example, if your credit card statement balance is $1,000, you’ll have to pay the full $1,000 to avoid being charged interest. Otherwise, your next credit card statement will include an interest charge applied to the unpaid amount. Paying your balance in full each month gives you a grace period to send payment and avoid paying interest. However not all transactions have an automatic grace period, even when you paid in full the previous months. You’ll be charged interest any month you make a cash advance or other type of transaction that does not have a grace period or if your credit card doesn’t have a grace period at all. Sometimes balance transfers have a promotional rate, while purchases receive the regular APR. You may incur finance charges if you transferred a balance to take advantage of a 0% rate and later made a purchase with the credit card before paying off the balance transfer.
When Credit Card Interest is Not Charged
You won’t be charged interest on your purchases if you started the billing cycle with a zero balance or you paid your last statement balance in full. You’re also not charged interest on balances with a 0% promotional APR. It is the case for any month that you begin the billing cycle with a $0 balance, for new and old credit cards and whether your credit card is open or closed. The grace period will start on the date the billing cycle ends and lasts about 25 days, depending on your credit card terms.
How Much Will You Pay?
The amount of credit card interest you pay each month can fluctuate based on your credit card balance and any changes to your interest rate. Your finance charge, which is how interest is applied to your balance, may be calculated in different ways based on your annual percentage rate and credit card balance. Read the back of your credit card statement for details on how your finance charges are calculated.
