Credit Cards and You: Getting the Most from Your Credit Card

Understanding the Interest-Free Period on New Purchases

You benefit from an interest-free period when you buy something with your credit card and the credit card company doesn't start charging you interest on the purchase right away. In other words, you're getting credit without having to pay for it. Be careful, the interest-free period doesn't always apply to your new purchases. See the section Determining If the Interest-Free Period Applies for more information.

It's important to remember that the interest-free period doesn't apply to balance transfers or cash advances. With these transactions, interest is charged immediately.

The interest-free period on new purchases starts on the date you make a purchase and ends when the credit card issuer begins charging you interest on that purchase. The interest-free period has two parts:

• the time between the purchase and your statement date; and
• the time between your statement date and your payment due date. This is called the grace period, and can vary from 15 to 26 days. To find out the length of the grace period for your credit card, see the comparison tables or ask your credit card issuer.

Here's an example of an interest-free period:

• Mr. Jones' statement covers transactions he made between May 1 and May 31 (31-day billing period).
• Mr. Jones made a new purchase on May 5.
• His payment due date is June 19. Therefore, the grace period provided by his credit card issuer is 19 days.

The total interest-free period on the purchase Mr. Jones made on May 5 is 45 days, but it only applies if he meets certain conditions.

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