How do credit cards work?

[DWarrior]

I'm thinking of getting a credit card, but I don't understand how the Grace Period works.

Say the terms are 25 days grace period if there is no previous balance or balance is paid in full.

Assuming I paid my June balance in full, and I buy something on July 2nd, does that mean I don't get charged interest until the 29th? If I pay my July balance as usual, say on August 5, does that mean I get charged interest on the July 2 purchase from July 29th until August 5? So does that mean I should be paying my CC bill a couple of times a month if I want to avoid interest?


Another question is say I have a June balance of $100. I make a minimum payment of $20, so I still have a remaining balance of $80. I then make a July 2 purchase of $10, with no grace period. I then pay off $80, effectively paying off my June balance. If I then make a purchse on July 10, does that purchase get the grace period, since I technically didn't have a previous month's balance, or do I get hit with no grace period?

[kerowo]

Meh. One month's interest is between 1 and 2%, if you can't afford it don't get a credit card.

[tboss888]

You do not have to pay any interest on anything you purchase during your billing cycle until your grace period is up. Usually the grace period is 2 weeks after close of billing cycle but it varies. So if you make a purchase at the beginning of your billing cycle then you have a roughly 6 week interest free loan, if you buy something at the end of billing cycle then you have a 2 week interest free loan. I'm assuming that you're 18 or younger?

[mbillie1]

[ QUOTE ]
Meh. One month's interest is between 1 and 2%, if you can't afford it don't get a credit card.

[/ QUOTE ]

Not being able to afford it is the primary motivation for most people to get a credit card in the first place, hence the sick debt rate in the US

[Shoe]

If you pay your bill in full each month, you won't pay any interest.

[Jamougha]

Get cards
Run up bills for 1.5x limit
Move countries
???
Profit!

[Humble Pie]

How Credit Cards Work

[sonneti]

[ QUOTE ]
If you pay your bill in full each month, you won't pay any interest.

[/ QUOTE ]

I've always paid my bill in full each month and they usually find some way of charging me somewhere.. bah :/

Whatever you do don't take any cash withdrawals, use credit cards for gambling or even use them with neteller, you will get raped on charges.

Someone told me before about getting credit cards and instead of paying off the balance each month put all your money in a high interest saver. When the interest free period is over transfer the balace to a different card. Not sure if it's worth it or still viable now though.

[slickpoppa]

No, you don't pay interest until 25 days after the end of the billing cycle. So for a purchase on July 1, you don't pay interest until August 25.

Credit cards are a really good deal if you pay your balance in full every month. You are essentially getting an interest free loan for everything you buy. For purchases at the beginning of a billing cycle, you have nearly 2 months until you have to pay off that purchase. Also, CC's give you much more protection against fraud than debit cards. There is 0 reason to use a debit card for purchases.

Your goal should be to keep as many of your assets invested or interest bearing accounts for as long as possible. There are many banks that offer savings accounts with over 5% interest. And there's no need to worry about getting the money out because banks are statutorily required to give you 6 free withdrawals every month.

[brandofo]

http://money.howstuffworks.com/credit-card.htm