If you pay your credit card bill in full each month and dont pay interest, youre using your credit wisely.
Youre not only getting a free 50-day loan through a credit cards grace period, but you can get some of the best credit card rewards without having to pay the high interest rates that usually accompany the best rewards cards.
Low-interest credit cards can offer modest rewards. High-interest cards, however, usually offer higher rewards, such as more airline miles, points or cash back.
The trick is to pay off the credit card in full each month and take advantage of the grace period ” the time between when a billing cycle closes and the bills due date. Youre only given the interest-free grace period if you paid the bill in full the previous month.
However, if you dont pay the bill in full each month, then getting a high-interest card with better rewards isnt a good idea.
Here are four things to know about grace periods to use to your advantage when you join the 30 percent of cardholders who pay in full every month:
All of these advantages can be lost if you carry a balance from the month before. Many card issuers may then cancel the grace period for the billing cycle, and interest will start accruing on new purchases immediately. Interest can only be charged from one month back if you dont pay a bill in full.
One last thing to be mindful of: Grace periods are for purchases only and usually dont apply to balance transfers or cash advances, which start accruing interest immediately.
Published with permission from RISMedia.