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When does interest begin to accrue?

mr_suave
Established Contributor

When does interest begin to accrue?

Is it after the due date or after the statement closes? This is under the assumptions that the statement balance isn’t paid by then.

For example, let’s say I make the minimum payment on a card on the due date then I pay the remaining of the statement balance on the closing date of the same statement (usually 3 days later). Will I occur interest for those couple days after the due date?
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Message 1 of 9
8 REPLIES 8
imaximous
Valued Contributor

Re: When does interest begin to accrue?


@mr_suave wrote:
Is it after the due date or after the statement closes? This is under the assumptions that the statement balance isn’t paid by then.

For example, let’s say I make the minimum payment on a card on the due date then I pay the remaining of the statement balance on the closing date of the same statement (usually 3 days later). Will I occur interest for those couple days after the due date?

You start accruing interest on purchases the day of the transaction. Your grace period is the time between the date your statement closes until your due date. If you pay the full amount by the due date, no interest is charged because of your grace period. If you don't pay the full amount, you owe interest on the remaining balance, which will be charged on your next statement.

Another thing to keep in mind is, if you don't pay your balance in full by the due date, you lose your grace period on any new purchases you make. So you will pay interest on the new purchases as well. You'll see those trailing interest charges the following month.

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Message 2 of 9
FinStar
Moderator

Re: When does interest begin to accrue?

OP, as explained above, and assuming you had a balance from the prior cycle, if you only pay the minimum on the due date and PIF the rest by or before the closing date, a finance charge will be assessed after the due date.

If you want to avoid any finance charges, then PIF the entire balance by the due date.
Message 3 of 9
mr_suave
Established Contributor

Re: When does interest begin to accrue?

Let me explain it a little better. The card is currently PIF but the due date falls 3 days before I get paid. I could take it out of my savings if needed then transfer it back when I get paid if I would occur interest. I have already made the minimum payment, I just need to pay the remaining of the statement balance to avoid interest.

So the entire statement balance does need to be paid by the due date correct?
Amex Green NPSL, Amex Hilton Surpass 5k, Amex Marriott Bonvoy 1k, AMEX BBP 1k, AMEX Biz Cash 6k, BOA Cash Rewards 5k, BOA Better Balance Rewards 2k, Care Credit 15k, Chase Amazon Visa 19.825k, Discover 11.8k, Discover 12.5k, Nordstrom Store 4.5k , Fidelity Visa 10k, Cap 1 QS 15k, Cap 1 Savor 10.5k, Citi Rewards+ 4.4k, Citi DC 8k, Citi Advantage Platinum 5.5k, US Cash+ 3.5k, Altitude Reserve 12.5k, Paypal Mastercard 4k, Apple Card 6.5k, Wells Fargo Cash Wise 5k, BOA Premium Rewards 8k, Citi AA Biz 1.5k, Flexperks Biz 3k
Message 4 of 9
HeavenOhio
Community Leader
Senior Contributor

Re: When does interest begin to accrue?

You have to pay your statement balance by the due date to avoid interest. If you don't do that, interest will begin kicking in on your current balance. And you'll have to jump hoops to make interest stop.

 

After the statement balance is paid, you may bring your balance down further by the statement cut date. Make sure the payment posts a day ahead of the statement date just to be safe.

 

Definitely borrow from savings for three days if that what it takes. If the current due date is inconvenient, maybe you can get it changed.

Message 5 of 9
FinStar
Moderator

Re: When does interest begin to accrue?

Ok, so just to be clear, you weren't carrying any balance during the prior months, correct?

If so, then let's say the only balance is from the statement that cycled recently. To avoid any finance charges, then yes PIF by or on the due date (be sure the payment is submitted by the cut-off time).
Message 6 of 9
DaveInAZ
Senior Contributor

Re: When does interest begin to accrue?


@mr_suave wrote:
Let me explain it a little better. The card is currently PIF but the due date falls 3 days before I get paid. I could take it out of my savings if needed then transfer it back when I get paid if I would occur interest. I have already made the minimum payment, I just need to pay the remaining of the statement balance to avoid interest.

So the entire statement balance does need to be paid by the due date correct?

Yes. And I made that exact mistake 2 months ago on my Synchrony PayPal 2% Cashback card. Their due date is the earliest before statement date of any of my CCs - due date on the 12th, statement on the 20th. In October the 12th was a Friday and I wanted the money to stay in my savings over the weekend earning interest, so I made the minimum payment on the 12th and paid the rest of the balance in full on Monday the 15th. When the statement cut they charged me over $20 in interest.  I used online Chat to question the interest charge and the rep explained that the statement balance has to paid in full by the due date to avoid interest, but because of my "outstanding management" of the account he would do a one time adjustment crediting back the interest charge and restoring my grace period, so I was lucky.

 

So don't do it, the nickles & dimes you make keeping the funds in savings aren't worth the risk of CC interest and loss of grace period.

Message 7 of 9
imaximous
Valued Contributor

Re: When does interest begin to accrue?

OP, one more thing I’m not sure if you already thought about. You can change your billing cycle with the bank and pick a different due date. Maybe you should select a day that aligns better with your paycheck cycle so you don’t run into this situation again. Just another idea.
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Message 8 of 9
UpperNwGuy
Valued Contributor

Re: When does interest begin to accrue?


@mr_suave wrote:
Let me explain it a little better. The card is currently PIF but the due date falls 3 days before I get paid. I could take it out of my savings if needed then transfer it back when I get paid if I would occur interest. I have already made the minimum payment, I just need to pay the remaining of the statement balance to avoid interest.

So the entire statement balance does need to be paid by the due date correct?

Yes, do this.  Take it out of your savings, pay the credit card in full, then pay your savings back from your paycheck.

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