Review of Interest Free Cedit Card Periods
Author: waterman
Posted: Sat Feb 17, 2007 12:38 pm
Post subject: Interest free period - yeah right!
Hi, just wondering if anyone would care to comment on the article below? Are there any cards around where the interest free period begins on the day of the purchase?
You'll often come across credit card offers that loudly and proudly proclaim they have 55 or more days interest free. This is misleading for several reasons.
First of all, your interest free period commences from the date of your last statement, not when you actually made the purchase. This means that when you make a purchase on your card you are unlikely to be entitled to the full interest free period, and may infact only be entitled to less then half your maximum allowance.
Example: Your monthly statement arrives on November 1st and you begin a new cycle. On the 25th you buy a flat screen television for $5,000 on your '55 days interest free' credit card.
You could be forgiven for thinking you had until January 19th to repay the television (November 25th to January 19th is 55 days), but you would be wrong. Actually, you only have until Christmas day (December 25th) to repay the debt before you are charged interest, since your 'grace' period begun on the 1st November, a full 24 days before you actually made the purchase!
Second, if you fail to repay the full amount of the debt by the due date, you are charged interest from the date of the purchase, not when your interest free period expired. This means that should you fail to repay the television in the example above by December 25th, you would automatically be charged 30 days worth of interest.
Lets assume your card had a 20% annual interest rate (known as an apr):
5000 * 0.20 / 12
= 83.33
This means that on the 26th December you would be slogged with just over $83 in interest charges, just for being 1 day late on your repayment. Keep in mind that most credit cards charge you interest on the full ammount of the purchase, even if you leave only $1 unpaid - so merely making the minimum repayments wont insulate you from these charges.
Third, if you didn't repay your debts off last month on time and in full, you are probably not entitled to an interest free period at all! If you have even one penny owing on your statement you automatically forfeit your entire interest free period on ALL purchases - you will now be charged interest from the day you made the purchase, possibly at a higher than usual rate.
No cards on the marketplace truly have 55 or more interest free days. Most of the time your actual interest free period will be somewhere between 25 and 55 days, and only when you have no outstanding credit card debt. Depending on the card it may actually be substantially less. To get the most out of an interest free period, try to make big purchases just after a new statement cycle begins - usually this is the 1st of the month, but not always (ask your credit card provider to be sure).
Thanks!
_________________
http://www.MyPlasticFriend.com.au
CardRatings.com is the most comprehensive source for comparing credit card offers. Please visit CardRatings.com to view the best rated credit cards!
Author: hate2work
Posted: Sat Feb 17, 2007 1:02 pm
Post subject:
Where is the article you refer to? Do you mean your Aussie website you have listed in your byline?
Everything you mention in your post has pretty much been the norm for every CC I've ever had. If you want to use your grace period to the max, you have to charge right after the card "closes" for the month, and then that charge will not be due until the end of the next cycle, sometimes as long as 55 days. By timing your purchases you can take advantage of that float.
To answer your question, every CC that has no outstanding debt on it has an interest free period( grace period ) starting on the day of the purchase. But the length of that interest free period is determined by where you are in the payment cycle when you make the purchase.
_________________
Shall I walk
or shall I ride?
"Ride", pleasure said.
"Walk", joy replied.
CardRatings.com is the most comprehensive source for comparing credit card offers. Please visit CardRatings.com to view the best rated credit cards!
Author: Polonius
Posted: Sat Feb 17, 2007 3:46 pm
Post subject:
Quote:
Are there any cards around where the interest free period begins on the day of the purchase?
Very few cards do not have a grace period, although there are some--providing you repay what's due by the payment due date on your statement. CapitalOne has its payment due date and its statement closing date on the same day for my three Cap1 cards. So if the statement date is, say, 2/16, I buy a plasma TV on 2/17, it will appear on my statement sent 3/16 and if I pay it off by the morning of 4/16 there'll be no interest charged on the purchase. I'd of course pay it off by 4/15 at the latest to avoid any sort of problem as to when on 4/16 the payment should have been credited. Still, that's more than 55 days...interest free...IF you're not carrying a balance.
So I don't see what problem the author of this article is writing about. Is he saying many credit card owners don't understand the terms they agree to? I'd agree with that point. But the banks are pretty clear about when the charges kick in and how much they are. And they ARE loaning you money free if you repay in full in accordance with those terms each month.
_________________
Polonius
"Neither a borrower, nor a lender be; For loan oft loses both itself and friend"
Author: waterman
Posted: Sun Feb 18, 2007 3:30 am
Post subject:
Hi, thanks for the replies guys.
hate2work, the article is from a credit card related blog I've been working on that isn't really country specific. I'll PM the details to you if you like.
Polonius, thanks for that information on the Cap1 cards. In answer to your question, you are correct - my point was to inform credit card owners about what I believe to be one of many 'traps' that can be avoided. I don't think the banks are really as clear as they could be.
Don't get me wrong, I'm not anti credit card, but I believe the vast majority of cardholders are no-where near as clued in as you or hate2work and it's in the banks best interest to keep consumers in this state of ignorance. Credit cards are great - but only when you use them properly.
_________________
http://www.MyPlasticFriend.com.au
Author: Polonius
Posted: Sun Feb 18, 2007 10:42 am
Post subject:
If you don't understand the terms, aren't you clued in when you see the finance charges on your statement? I don't think it's all that confusing if you pay a little attention to your statement itself!
CardRatings.com is the most comprehensive source for comparing credit card offers. Please visit CardRatings.com to view the best rated credit cards!
Posted: Sat Feb 17, 2007 12:38 pm
Post subject: Interest free period - yeah right!
Hi, just wondering if anyone would care to comment on the article below? Are there any cards around where the interest free period begins on the day of the purchase?
You'll often come across credit card offers that loudly and proudly proclaim they have 55 or more days interest free. This is misleading for several reasons.
First of all, your interest free period commences from the date of your last statement, not when you actually made the purchase. This means that when you make a purchase on your card you are unlikely to be entitled to the full interest free period, and may infact only be entitled to less then half your maximum allowance.
Example: Your monthly statement arrives on November 1st and you begin a new cycle. On the 25th you buy a flat screen television for $5,000 on your '55 days interest free' credit card.
You could be forgiven for thinking you had until January 19th to repay the television (November 25th to January 19th is 55 days), but you would be wrong. Actually, you only have until Christmas day (December 25th) to repay the debt before you are charged interest, since your 'grace' period begun on the 1st November, a full 24 days before you actually made the purchase!
Second, if you fail to repay the full amount of the debt by the due date, you are charged interest from the date of the purchase, not when your interest free period expired. This means that should you fail to repay the television in the example above by December 25th, you would automatically be charged 30 days worth of interest.
Lets assume your card had a 20% annual interest rate (known as an apr):
5000 * 0.20 / 12
= 83.33
This means that on the 26th December you would be slogged with just over $83 in interest charges, just for being 1 day late on your repayment. Keep in mind that most credit cards charge you interest on the full ammount of the purchase, even if you leave only $1 unpaid - so merely making the minimum repayments wont insulate you from these charges.
Third, if you didn't repay your debts off last month on time and in full, you are probably not entitled to an interest free period at all! If you have even one penny owing on your statement you automatically forfeit your entire interest free period on ALL purchases - you will now be charged interest from the day you made the purchase, possibly at a higher than usual rate.
No cards on the marketplace truly have 55 or more interest free days. Most of the time your actual interest free period will be somewhere between 25 and 55 days, and only when you have no outstanding credit card debt. Depending on the card it may actually be substantially less. To get the most out of an interest free period, try to make big purchases just after a new statement cycle begins - usually this is the 1st of the month, but not always (ask your credit card provider to be sure).
Thanks!
_________________
http://www.MyPlasticFriend.com.au
CardRatings.com is the most comprehensive source for comparing credit card offers. Please visit CardRatings.com to view the best rated credit cards!
Author: hate2work
Posted: Sat Feb 17, 2007 1:02 pm
Post subject:
Where is the article you refer to? Do you mean your Aussie website you have listed in your byline?
Everything you mention in your post has pretty much been the norm for every CC I've ever had. If you want to use your grace period to the max, you have to charge right after the card "closes" for the month, and then that charge will not be due until the end of the next cycle, sometimes as long as 55 days. By timing your purchases you can take advantage of that float.
To answer your question, every CC that has no outstanding debt on it has an interest free period( grace period ) starting on the day of the purchase. But the length of that interest free period is determined by where you are in the payment cycle when you make the purchase.
_________________
Shall I walk
or shall I ride?
"Ride", pleasure said.
"Walk", joy replied.
CardRatings.com is the most comprehensive source for comparing credit card offers. Please visit CardRatings.com to view the best rated credit cards!
Author: Polonius
Posted: Sat Feb 17, 2007 3:46 pm
Post subject:
Quote:
Are there any cards around where the interest free period begins on the day of the purchase?
Very few cards do not have a grace period, although there are some--providing you repay what's due by the payment due date on your statement. CapitalOne has its payment due date and its statement closing date on the same day for my three Cap1 cards. So if the statement date is, say, 2/16, I buy a plasma TV on 2/17, it will appear on my statement sent 3/16 and if I pay it off by the morning of 4/16 there'll be no interest charged on the purchase. I'd of course pay it off by 4/15 at the latest to avoid any sort of problem as to when on 4/16 the payment should have been credited. Still, that's more than 55 days...interest free...IF you're not carrying a balance.
So I don't see what problem the author of this article is writing about. Is he saying many credit card owners don't understand the terms they agree to? I'd agree with that point. But the banks are pretty clear about when the charges kick in and how much they are. And they ARE loaning you money free if you repay in full in accordance with those terms each month.
_________________
Polonius
"Neither a borrower, nor a lender be; For loan oft loses both itself and friend"
Author: waterman
Posted: Sun Feb 18, 2007 3:30 am
Post subject:
Hi, thanks for the replies guys.
hate2work, the article is from a credit card related blog I've been working on that isn't really country specific. I'll PM the details to you if you like.
Polonius, thanks for that information on the Cap1 cards. In answer to your question, you are correct - my point was to inform credit card owners about what I believe to be one of many 'traps' that can be avoided. I don't think the banks are really as clear as they could be.
Don't get me wrong, I'm not anti credit card, but I believe the vast majority of cardholders are no-where near as clued in as you or hate2work and it's in the banks best interest to keep consumers in this state of ignorance. Credit cards are great - but only when you use them properly.
_________________
http://www.MyPlasticFriend.com.au
Author: Polonius
Posted: Sun Feb 18, 2007 10:42 am
Post subject:
If you don't understand the terms, aren't you clued in when you see the finance charges on your statement? I don't think it's all that confusing if you pay a little attention to your statement itself!
CardRatings.com is the most comprehensive source for comparing credit card offers. Please visit CardRatings.com to view the best rated credit cards!
Labels: 0% Interest Credit Cards, Interest Free Credit Cards
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