The Ultimate Guide to Credit Cards
Tuesday, May 17, 2022

When Does Interest On a Credit Card Start?

When Does Interest On A Credit Card Start

credit card advice

Marcie Geffner

Written by: Marcie Geffner

Marcie Geffner

Marcie Geffner is an award-winning reporter, editor, and writer. Her stories about banking, credit cards, insurance, economics, small business, and other subjects have been featured by the Los Angeles Times, Washington Post, Bankrate, Credit Karma, Bookmarks Magazine, FOX Business, CNBC, Yahoo! Finance, and dozens of major U.S. newspapers. Her articles have been cited in seven nonfiction books and two U.S. Congressional hearings. She edits nonfiction, memoir, and fiction, and contributes to Kirkus Reviews. Marcie holds a bachelor’s degree in English from UCLA and MBA from Pepperdine University.

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Edited by: Lillian Guevara-Castro

Lillian Guevara-Castro

Lillian is a Content Editor who brings her journalism experience in business and consumer finance to ensure CardRates news articles and reports have been edited for overall clarity, accuracy, and reader engagement. Her primary goal is to assure editorial content meets the highest level of quality and precision.

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Interest charges for credit card purchases don’t have to cost an arm and a leg — or even a finger or toe.

With its relatively high interest rates, credit card debt can be among the most expensive debt you’ll ever experience. But a few smart habits can set you up to never pay a penny of credit card interest, which can save you hundreds or thousands of dollars that you can reallocate to higher priorities, such as living expenses, savings, and investments.

The first thing you need to know to accomplish this feat is when the interest starts on your cards.

It Depends On Your Card’s Billing Cycle

The day credit card interest starts depends on the card’s billing cycle and its grace period.

Most cards use a monthly billing cycle, which means you’ll normally receive one bill each month. Each bill will have a minimum payment and payment due date printed on it. You must pay at least the minimum on or before the due date to keep the card in good standing.

Most due dates include a grace period of about 21 days. During this period, you can carry your current purchases as a balance without paying purchase interest. The grace period generally starts the day your card’s billing cycle closes and ends on the day your payment’s due.

The exact dates for billing cycles, grace periods, and payment due dates may vary from month to month due, in part, to weekends, holidays, and months of differing lengths (i.e., 28, 29, 30, or 31 days).

Photo of a credit card and billing statement.
Your billing cycle, grace period, and payment due date are found on your monthly bill.

If you don’t pay at least the minimum on or before the due date, interest will be added to the balance. The applicable APR will be applied to your balance, and the balance will carry over into the next billing cycle. Interest will continue until your balance is paid off.

Cash advances are a special case. There’s typically no grace period for these transactions. Instead, interest charges start when the cash is withdrawn.

Your Interest (APR) Is Based On Several Factors

Credit card interest is usually expressed as annual percentage rates, or APRs. Each card may have multiple APRs that can be used to calculate interest. 

For example, a card may have:

  • An APR for an initial balance that’s not paid within the grace period or a balance that’s carried over from a previous billing cycle.
  • An APR for new purchases during a billing cycle.
  • A temporary or lower promotional APR for new purchases, outstanding balances, or balance transfers with a new card.
  • A penalty APR for new purchases and existing balances after a late or missed payment.

The specific APRs you’ll be charged depend on the prime rate, your bank’s rate policies, the type of card you have, and your credit scores.

If you have good or excellent credit, you should be able to qualify for most cards, including many with a more attractive range of APRs. With fair credit, you may still qualify for many good cards, although the range of APRs likely will be somewhat higher. With poor credit, you likely won’t qualify for most unsecured cards with relatively attractive rates.

Most Cards Offer an Interest-Free Grace Period 

Most cards don’t charge interest for new purchases if you pay your balance in full on or before the due date each month. If your card doesn’t offer a grace period, interest charges can start immediately for every purchase you make.

The charges you don’t pay become your unpaid or outstanding balance. Unpaid balances are rolled over, or carried over, to the next month —  and the next and so on until you pay them off. 

The grace period doesn’t apply when amounts are carried over, so interest charges continue to be added daily until the balance is paid.

Photo of a credit card's grace period terms within the cardholder agreement.
Your card’s grace period can be found in your cardholder agreement and monthly billing statement.

Because interest doesn’t stop once it starts, your balance could increase from one month to the next, even if you made a partial payment or didn’t use your card for any new purchases.

Card interest is usually charged daily, even though it doesn’t appear on your statement until your billing cycle closes. Interest that’s charged daily is called compound interest. Interest that’s charged monthly is known as simple interest.

Compound interest costs you more than simple interest because you’re paying interest every day on your balance plus your accumulated previous interest. The minimum payment printed on your statement may not be high enough to pay off all the interest charges for that month.

How to Pay $0 Credit Card Interest

Avoiding paying credit card interest may not be easy, but it’s an excellent financial habit to learn. If you’re disciplined about it, you can use cards for their convenience, reward programs, and other perks without ever paying interest. 

The secret is to pay your balance in full every month on or before the due date (i.e., within the grace period). If you’re not able to make your payment every month, you may need to rethink your budget or spending habits.

If paying off your balance each month isn’t possible, you can reduce the amount of interest you pay by making more than one payment each month. You don’t have to wait until your payment is due to make a full or partial payment. Pay more and pay sooner whenever you can.

A Balance Transfer Can Lower Interest Charges

If you’re already carrying a balance, you may be able to stop paying interest for a while with a new balance transfer card. Balance transfer cards give you a lower promotional APR, often 0%, for balances that you transfer from other cards. 

Balance transfers usually charge a fee of between 3% and 5% of the amount transferred. The amount you can transfer is usually capped.

Balance transfers aren’t a cure-all for unaffordable card debt, but they offer a short-term respite for you to pay off amounts you already owe with lower or 0% interest. Here are our top three balance transfer card recommendations:

Discover it® Balance Transfer Review

at Discover Card’ssecure website

0% BALANCE TRANSFER RATING

★★★★★
5.0

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Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
0% Intro APR for 6 months
0% Intro APR for 18 months
12.24% – 23.24% Variable APR
$0
Excellent/Good/Average

0% BALANCE TRANSFER RATING

★★★★★
4.9

OVERALL RATING

  • No Late Fees, No Penalty Rate, and No Annual Fee… Ever
  • 0% Intro APR for 21 months on balance transfers from date of first transfer and 0% Intro APR for 12 months on purchases from date of account opening. After that the variable APR will be 15.49% – 25.49%, based on your creditworthiness. Balance transfers must be completed within 4 months of account opening.
  • There is a balance transfer fee of either $5 or 5% of the amount of each transfer, whichever is greater.
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Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
0% Intro APR Period 12 months on Purchases
0% Intro APR Period 21 months on Balance Transfers
15.49% – 25.49% (Variable)
$0
Excellent, Good Credit

Additional Disclosure: Citi is a CardRates advertiser.

0% BALANCE TRANSFER RATING

★★★★★
4.9

OVERALL RATING

  • 0% Intro APR for 21 months on balance transfers from date of first transfer and 0% Intro APR for 12 months on purchases from date of account opening. After that the variable APR will be 14.49% – 24.49%, based on your creditworthiness. Balance transfers must be completed within 4 months of account opening.
  • There is a balance transfer fee of either $5 or 5% of the amount of each transfer, whichever is greater
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  • The standard variable APR for Citi Flex Plan is 14.49% – 24.49%, based on your creditworthiness. Citi Flex Plan offers are made available at Citi’s discretion.
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
0% 12 months on Purchases
0% 21 months on Balance Transfers
14.49% – 24.49% (Variable)
$0
Excellent, Good

Additional Disclosure: Citi is a CardRates advertiser.

When you transfer a balance, keep track of the date when your promotional rate ends, and try to pay as much of your balance as you can before then. The full APR will likely be much higher than the promotional APR.

If a balance transfer doesn’t give you enough relief to manage your debt, you may need to consider other options, such as a card repayment plan.

When you shop for a balance transfer card, look for one that has no annual fee, a promotional 0% rate for new purchases, and a competitive rate for any balance you carry over after your promotional balance transfer period ends. 

Some great balance transfer cards offer 0% rates for up to a year or longer.

How to Calculate Credit Card Interest 

You don’t typically need to calculate credit card interest yourself. Instead, your interest charges will be calculated for you by your card issuer and included in your balance for each billing cycle.

If you want to figure out in advance how much interest you’ll be charged for a specific transaction or balance over a set period, the best option is to use an online interest calculator.

Alternatively, you can make rough calculations with paper and a pencil. You’ll need to know the amount of the purchase or balance and your APR for that amount.

The first step is to divide your APR — the annualized rate — by the number of days in the year. The result is the daily periodic rate or DPR.

Some card companies use a 360-day year; others use a 365-day year. The 360-day year is a convenient fraction based on 12 months, each with exactly 30 days.

The difference between a 360-day year and a 365-day year generally isn’t material for most basic interest calculations. For example, a 25% APR with a 365-day year results in a DPR of approximately 0.068493%. The same APR with a 360-day year results in a DPR of approximately 0.069444%.

A DPR of 0.068493% 0.069444% adds about seven cents ($0.07) for each $100 of your outstanding balance each day. 

If your outstanding balance were, say, $3,500, you’d owe about $2.45 in interest for one day. For 30 days, the interest would amount to about $74. Here are the calculations:

$3,500 / $100 = 35

35 x $0.07 = $2.45

$2.45 x 30 days = $73.50

This calculation isn’t accurate to the penny because it doesn’t compound the interest daily, but it’s still useful as a quick guide. For a relatively short period and a modest balance, the difference likely won’t be material. 

Over a longer period, you can use the APR rather than the DPR to calculate the interest.

If you want an exact calculation for a period less than one year, you’ll need to contact your card company and ask whether they use a 360-day or 365-day year for your card.

Are You Ready to Change Your Card Habits?

Despite the popular perception, credit card interest isn’t evil. Nor is it necessarily a poor financial habit to pay some card interest from time to time. Interest is simply the price you pay for the privilege of carrying a balance from one month to the next. Many people choose to pay that price.

If you’ve fallen into the habit of paying high interest charges and you’re looking for some relief, 0% balance transfer offers, 0% promotional rates for new cards, and a firm resolve to curtail your spending and pay down your balances may help you avoid more interest charges in the future.

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