🎯 In 30 seconds: Pay the full statement balance by the due date and most cards charge no interest on purchases. Carry a balance and interest starts on everything, rewards stop mattering, and paying only the minimum can stretch a $3,000 balance over 15 years.
The billing cycle and the grace period
Each month the card closes a billing cycle and sends a statement. The grace period is the gap between the end of the cycle and the payment due date. Pay the full balance in that window and you generally owe no interest on purchases.
- Grace periods are not required by law, but most cards offer one on purchases.
- The issuer must mail or deliver your bill at least 21 days before the due date.
- Carry any balance past the due date and you usually lose the grace period: interest then applies to new purchases from the day you make them, until you pay in full again.
APR and how interest is charged
APR is the yearly interest rate. Most cards charge it daily: APR ÷ 365 on your average daily balance. A card can have several APRs at once: purchases, cash advances, balance transfers, and a penalty APR after a late payment. Find them in the rates and fees table of your card agreement, and check today’s typical rates on Rates.
The minimum payment trap: worked example
$3,000 balance at 22% APR, no new charges. Minimum payment here is interest plus 1% of the balance, with a $25 floor (a common formula; yours may differ). The first minimum is about $85.
| Plan | Time to pay off | Total interest |
|---|---|---|
| Minimum only | 180 months (15 years) | about $4,433 |
| Fixed $150 a month | 26 months | about $771 |
The minimum shrinks as the balance shrinks, so it never gets ahead. Paying a fixed amount saves about $3,660 and 13 years. Your statement is required to show how long minimum-only payments would take.
Cash advances, balance transfers and rewards
Cash advances (ATM withdrawals on a credit card, and some cash-like purchases) usually have no grace period, so interest starts the same day, often at a higher APR, plus a fee. Card agreements filed with the CFPB commonly show the greater of $10 or 4% to 5%.
Balance transfers move debt from one card to another, often at a low promotional rate. The CFPB says the fee is typically 3% to 5% of the amount moved, so moving $3,000 costs $90 to $150 up front. A promotional rate must last at least 6 months. Before transferring, check what rate applies when the promotion ends, and stop using the old card for new spending.
Rewards vs interest. Earning 2% cash back on $1,000 a month is $240 a year. Carrying a $3,000 balance at 22% costs about $660 a year in interest. Rewards only come out ahead when the balance is paid in full every month.
Your protections under the CARD Act
- 45 days’ notice before the rate on new purchases goes up, and generally no increase on new transactions in the first year.
- Existing balances are generally protected from rate increases unless you are more than 60 days late, a promotional rate ends, or a variable rate’s index rises.
- Penalty rate rollback: if your rate went up because you were 60+ days late, the old rate must come back after six on-time minimum payments in a row.
- Payments above the minimum generally go to the balance with the highest rate first.
- Same due date each month, and the 21-day bill rule above.