How do I Determine If the Interest-Free Period Applies?

• Credit cards and you introduction
• Understanding credit card terms
• Steps for successfully selecting a credit card
• Learn why credit cards offer introductory low interest rates
• How credit card interest rates are calculated
• Credit Cards offer interest free periods on purchases
• Does your interest free period apply on our purchase?
• Use these tips to save money with your credit cards
• Credit card selection checklist
• Download Worksheet to Help You Choose a Credit Card

Determining If the Interest-Free Period Applies

Credit card issuers use one of two methods to decide whether the interest-free period applies to your new purchases:

• Method 1: With this method, the interest-free period applies to your new purchases only if you pay your current month's balance in full, by the due date.
  
  
• Method 2: With this method, the interest-free period applies to your new purchases only if you pay your current month's balance in full, by the due date, and you have also paid your previous month's balance in full, by the due date (in other words, you're not carrying a balance from the previous month).
  

As an example, let's look at Mr. Jones. He didn't pay his April balance in full, so he carried a balance of $2,000 from that month. On May 5, he made a new purchase of $1,000. He paid his new balance in full, by the due date shown on his statement (June 19). Here's how the two different methods would affect him.

• If Mr. Jones' credit card issuer uses Method 1
  Mr. Jones will have to pay interest only on the $2,000 carried over from April. He will get the interest-free period on his new purchase of $1,000, because he paid his current balance in full, by the due date of June 19.
  
  
• If Mr. Jones' credit card issuer uses Method 2
  Mr. Jones will have to pay interest on the $2,000 carried over from April and on the new purchase of $1,000, because Mr. Jones carried a balance over from April.
  

To find out which method your credit card issuer uses, ask your issuer or refer to the comparison tables.

Flowchart 2

Follow the flowchart below to find out whether the interest-free period applies to your new purchases. Remember to check the comparison tables to see whether your credit card issuer uses Method 1 or Method 2.

Will you be paying your current month's balance in full, by the due date? Yes. (See below for No option)
If your credit card issuer uses Method 1
The interest-free period on new purchases will apply. No interest will be charged on the new purchase.
If your credit card issuer uses Method 2 (2 options)
Did you pay your previous month's balance in full and by the due date? Yes.
The interest-free period on new purchases will apply. No interest will be charged on the new purchase.
Did you pay your previous month's balance in full and by the due date? No.
The interest-free period on new purchases won't apply. Interest will be charged from the purchase date (or, in some cases, the posting date) until the balance is paid in full.

Will you be paying your current month's balance in full, by the due date? No.
The interest-free period on new purchases won't apply. Interest will be charged from the purchase date (or, in some cases, the posting date) until the balance is paid in full.