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This Credit Card Tip Can Help You With Large Purchases

Large purchases are no small matter – if you decide to make them with a credit card, that is. If you’re looking to buy big-ticket items like a new refrigerator, widescreen TV, a set of car tires, or that extra-plush couch that’s calling your name, pulling out your card and charging it can mean punishing interest payments down the road. But understanding your card’s billing cycle and taking advantage of what’s called the grace period can help you manage big purchases while avoiding costly interest fees.

Photo: Ardity

A Bit About Billing Cycles

On average, a credit card billing cycle, or statement cycle, can last about 28 days to 31 days; the cycle always begins and ends on the same date each month. Your most recent charges, whether large or small, don’t accumulate interest during that stretch of several weeks – as long as you pay your balance in full each month.

Your grace period comes afterward, and lasts from the day the company adds up your monthly purchases through your payment due date. According to the Consumer Financial Protection Bureau, credit card companies aren’t required to offer a grace period, but nearly all do for people who pay their bills in full. The Bureau also notes that businesses must mail or deliver your credit card bills a minimum of 21 days before your payment is due.


Maximizing Grace Period Benefits

If you’re looking to maximize the benefits of your credit card grace period, consider making large purchases at the very beginning of your billing cycle. For example, learn which day your bank tallies up your charges and make your big buy in the days right afterwards. Depending on the length of your grace period, you’ll have nearly the full billing cycle of about a month as well as the grace period of several weeks or more. The end result:  You could have nearly two full months to pay off your balance, including your big-ticket item, without the additional cost of interest.

Keep in mind that you’ll need to pay your balance in full in order to keep the longer payoff window that a grace period provides and avoid interest on your purchases. If you decide to pay just the minimum and carry a balance, you’ll likely lose your grace period for new purchases, which means you’ll not only be charged interest sooner for purchases, but you’ll also be charged interest on the unpaid balance.

It’s worth noting that a grace period is especially helpful when you have a new credit card and you’re hoping to meet the requirements for a welcome offer. If you’re not paying any interest on the card, you’re in a better position to maximize the value of your credit card bonus or rewards program.

Cash advances on your credit card don’t usually come with a grace period, meaning that  interest charges typically begin accumulating on the day you accept the money. If you’re in a need-money-now bind, consider other options before choosing the cash advance route such as borrowing from a friend or family member, or securing  a low-interest debt consolidation loan from a credit union, bank, or online lender.