After I learned to stop using my credit card for buying things and paying for expenses, I learned how to use my credit card for buying things and paying for expenses.
By this, I mean I realized that I can use the credit card as a tool, especially if it offers a rebate like my current card, for controlling my cash flow. But the only way this works is if I pay attention to my grace period. The grace period is the period of time between the statement date and the date that interest begins to be added to that charge. If you carry a balance from one month to the next, then it’s likely you have no grace period and interest begins accruing the day you make a credit card purchase.
If you poay your credit card in full each month, you may have a grace period between 20 and 30 days. When I started using my current card (Citibank Dividend Platinum Select) earlier this year, my grace period was 25 days from the next statement date. For example, if I purchased gas on April 17, it would appear on my statement released May 5. The due date for that statement would be May 30, and no interest would be charged until that date. This way, the cash payment for the gas expense is delayed over a month.
Citibank quietly changed my grace period on my July statement. The date of the statement was July 7 but the due date was July 27, reducing my grace period to 20 days. This deserves my attention because often my money needs to be withdrawn from ING Direct or Emigrant Direct (where it is earning interest) sometime before I transfer money from checking to the credit card.
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Also, watch out for credit card companies eliminating the grace period altogether. This is how they stand to make money off of those of us who pay our entrie balances off every month.
Flexo, sorry I posted this comment on your “intro” page be mistake. You may want to edit it out.
The grace period is one of my favorite features on my credit card (the other one is the rewards), it means I can’t spend money and pay it 20-50 days later while my money is sitting in my own account earning interests (as long as one doesn’t carry a balance). Unfortunately, this also means that banks don’t like this feature, because this cost them money. So one of the ways they accelerate people’s payment is put an earlier “pay by� date on the statement, as Flexo experienced on his Citibank card.
Two ways to deal with this, one is to just call them and ask them to change it back to 25 days. I tried this on my own Citi card and they changed immediately. The other way is actually ignore it. If you read the fine prints of your credit card, chances are your grace period is still 25 days. They just print the “pay by this date� at an earlier date (say, 20 days after your statement date) to get you to pay sooner. As long as you pay before the actual due date, you won’t get late fee or finance charges. If you are not comfortable with the second approach or can’t find your card agreement, just call them.
Hi flexo, I have the same card as you and do the same thing. Only difference, I pay my credit card directly from my ING Direct account and I don’t have to worry about transferring it to checking first. I recommend this method vs. what you are doing.
Jay,
That’s a great idea! Armed with the ING Direct routing number, I can link the account to my credit card. Excellent.
FYI, if you use your ING Direct account to pay your credit cards, be sure you don’t make more than 6 withdrawals per statement cycle. I think this is a standard limitation on any savings accounts.