Avoid Credit Card Interest Using the Grace Period
You can avoid credit card interest entirely by staying in your credit card’s grace period paying your statement balance in full before the due date each month. While paying only the minimum keeps your account in good standing, paying your full balance means you borrowed and kept your purchases interest free.
Transcript
[ELLEN]
"That's interest-free money for you."
[JAMES: Possible customer]
"I've been in credit card debt before, but now… I'm avoiding it by limiting my usage on credit cards. I don't allow myself to use any more than 25 to 30% of my limit and only really for purchases that I have the money for as well.
So that way I can pay right off.
So that's my new thing."
[ELLEN]
"A lot of people will tell you, pay your credit card in full every month. That is absolutely the best.
But if you can't do that, paying more than the minimum and paying as much as you can afford every month can also create a really good path out of debt."
[ELLEN]
"If you pay the minimum balance on your credit card every month, it's going to keep your account in good standing, which is a plus for your credit score, but it's going to be very expensive."
[ELLEN]
"There’s another concept with credit cards called a grace period… If you pay your credit card in full every month, you will typically not pay any interest… even though it may take a month between when you made the purchase and when you pay back that credit card."
[ELLEN]
"That’s interest-free money for you—as long as you pay that balance in full every month. Credit cards give you this grace period of time between when you make a purchase and when it starts accruing."
[ELLEN]
"That doesn't actually mean there's zero balance on your credit card because you may have made purchases after your statement."
[ELLEN] "If you pay that statement balance before the due date, then you've paid off your credit card."
