If I Pay Off My Credit Card Balance at the End of the Month, Will I Have Finance Charges?

Most credit card issuers give consumers a period each month during which finance charges won’t accrue – called the “grace period.” The grace period covers the time between the billing cycle ending date and the payment due date. Grace periods remain in effect for consumers who pay a balance in full each month. Read the fine print of your credit card agreement -- you might not have a grace period for balance transfers and cash advances.

The Credit Card Accountability Responsibility and Disclosure Act – also called the CARD Act -- made some key changes to the way credit card issuers structure payment dates and billing cycles. Credit card companies have to mail credit card bills at least 21 days before payment due dates. Payment due dates should not change from month to month. If a payment due date falls on a weekend or holiday, you have until the following business day to make your payment. The time cut-off for payments on the payment due date can’t be earlier than 5 p.m. Eastern time.

As long as you pay in full and don’t carry a balance, your credit card use won’t rack up interest charges. Any month you decide not to pay your balance in full and you carry a balance over into the next billing cycle, you could be hit with immediate finance charges. Credit card companies typically begin charging interest on new purchases from day one in subsequent billing cycles when you carry a balance on your card.

The timing for credit card payments can make a difference in your overall payments. If you find yourself carrying a balance and you want to reduce the finance charges on your new purchases and balance, make your payment as quickly as possible after receiving your bill. Interest compounds every day of the billing cycle, so the faster you make a monthly payment, the lower the balance will be for additional interest accrual.