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Purchase via credit card is very popular now a days. Banks and financial institution offers different schemes on credit cards. One of the scheme that attracts most customers is 0% interest rate on purchase if paid within 45 or 60 days. But most of the credit cardholders does not know how to use this facility or scheme. To understand this, we need to know two basic things related with credit card business. They are :
Statement Day – the day in which your statement is generated.
Payment Due Date – the day in which you have to pay minimum payment on your out understanding.
In statement day, all your outstanding ,interests and other fees are calculated and you see the reflection of your total outstanding on your statement. In payment due date, you have to pay at least the minimum payment or clear all the dues. Here, I am going to give an example:
Suppose ,your –
Statement day -25 th day of month
Payment due date – 10th day of month.
Now the question arise how you get 45 days grace period on purchase(no interest charged)?
The most interesting fact here is that if a transaction or purchase is not reflected in your statement, you are not required to pay that debt on current billing cycle. More specific I want to say—
On 25th march, your statement is generated and you have dues of $100 dollar which you have to pay or pay at least minimum payment within 5th April. Now you have made a purchase or transaction of $500 dollar on 26th march. Now, you don’t need to pay this $500 dollar on 5th April because it is not reflected on the statement day of 25th march. So, on 5th April, payment due day, you have to pay only $100 dollar or minimum payment that is reflected on your statement. Now you get the grace period of 45 days on purchase :
26 March – Purchase Day
10 April – Payment Due Date
25 April – The statement is generated where purchase of 26th march will be reflected.
10 May – Payment Due Date
So, from 26 march to 10 May, you will get 45 days. Now, if you pay the whole transaction bill within this period, then no interest will be calculated on this purchase.
Now, suppose, you made a transaction on 15 March. For how many days ,you will get grace period or no interest charged on purchase?
15 March – Purchase Day
25 March – Statement Day
10 April – Payment Due Date
So, from 15 march to 10 April, you will get 25 days. Now, if you pay the whole transaction bill within this period, then no interest will be calculated on this purchase.
Hope, readers got my point. The outstanding you need to pay in a billing cycle is normally depends on the fact that the purchase or transaction should be reflected in your statement day. The transaction or purchase that is not reflected on your current billing cycle or statement is called the unbilled transaction.
But never think that banks or financial institutions are fool. If you are not able to pay full amount of purchase after 45 days then in your next statement day, you will find that interest have been imposed from first day of your transaction day. That means, you have to pay,
Purchase Amount+ Interests of 45 days+10 days(until statement day)
This does not mean you have to pay full amount. You are unable to pay full amount then you can pay the minimum payment that is reflected on your statement on Payment due date. But interests will be calculated compound way until you pay the full outstanding of your credit cards.
FEW THINGS TO NOTE:
1.Always ask your credit card vendor or banker about the statement date and payment due date.
2.Find out other hidden charges related with it.
3.Make sure you are able to pay within 45 days or 60 days otherwise you have to 4.pay huge interest on purchase or transaction.
4.Interest will be calculated from the first day of the purchase or transaction if minimum payment is not paid on payment due date.
5. 0 % interest fee normally applicable for 45 days to 60 days from the transaction date depending on financial institution.
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