How to Avoid Credit Card Finance Charges

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Credit cards allow you to make purchases today and pay for them later. But, the convenience of paying over time may come at a cost. If it takes you more than a few weeks to pay off your balance, you'll pay a fee in the form of a finance charge, increasing the cost of having a credit card. The longer it takes you to pay off your balance, the more you'll pay in finance charges. You can avoid finance charges on almost all credit cards, but it's all about the timing and amount of your credit card payment.

How to Avoid a Finance Charge

Since finance charges are the credit card issuer's way of charging you for carrying a balance, the simple way to avoid finance charges is to pay your full balance each month.

Here's how it works.

Your credit card has a grace period—typically between 21 and 25 days after your billing cycle ends—which is your chance to pay your full credit card balance and avoid finance charges.

You must pay the balance listed on your credit card statement to avoid being assessed a finance charge on your next statement. If you pay just part of your balance, your next billing statement will have a finance charge added based on the unpaid balance and any new purchases you make.


You can typically find the length of your grace period on your billing statement. Your statement may even include a disclosure that states the date you have to pay off your balance to avoid finance charges.

How Promotional Rates Affect Finance Charges

Some credit cards offer a zero percent introductory interest rate to entice new customers who want to avoid interest on new purchase or a high interest rate balance from another credit card. During the promotional period, you generally won't receive a finance charge on promotional balances even if you don't pay your balance in full. However, once the promotional period ends, any remaining balance will start accruing finance charges at the regular APR.


Some balance transfer promotions lose their grace period if you make a new purchase after the transfer posts to your account. You'll have to pay the entire balance—the transfer and your new purchases—to avoid future finance charges.

Deferred interest promotions are often promoted similar to zero percent balance transfers, but they're a little different. A deferred interest offer will backdate interest on your balance—assess the full finance charge from the start of the promotional period—if you don't pay the balance by the time the promotional period ends.


Always read the terms of your promotional offers to know whether you need to pay off the full balance before the end of the promotional period to avoid paying finance charges on the balance. You don't want to be caught off guard with several months of finance charges added to your balance.

Finance Charges You Can't Avoid

You'll typically only get a grace period when your previous balance was paid in full and you started the billing cycle with a zero balance. Starting the billing cycle with a balance leaves you susceptible to finance charges on the unpaid balance and any new purchases you make. You'll have to bring your balance to $0 before the grace period applies again.

Unfortunately, you may not be able to avoid finance charges on all types of balances. Except when a promotional rate applies, balance transfers and cash advances typically don't have a grace period. When it comes to these types of balances, the only way to avoid a finance charge is to stay away from those transactions completely.

Frequently Asked Questions (FAQs)

How do you calculate your finance charge?

Your finance charge is your card's interest rate multiplied by the balance subject to finance charges. Let's say your credit card has an interest rate of 20%, and you have an outstanding balance of $1,000. In that case, you'd multiply 1,000 by 0.2, giving you 200. The finance charge in this scenario would be $200.

What's the difference between a service charge and a finance charge?

A finance charge specifically concerns debt. It is the cost of carrying debt. Service charges, processing fees, and other charges along those lines are related to transactions. They are the cost of finalizing the sale at that moment with a credit card.

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  1. Federal Trade Commission. "Credit, Debit, and Charge Cards."

  2. Consumer Financial Protection Bureau. “Credit Card Contract Definitions.”

  3. Chase. “Cardmember Agreement Rates and Fees Table,” Page 5.

  4. Consumer Financial Protection Bureau. "What Is a Grace Period for a Credit Card?"

  5. Chase. "Sample Cardmember Agreements."

  6. Consumer Financial Protection Bureau. "You Could Still End up Paying Interest on a Zero Percent Interest Credit Card Offer."

  7. Consumer Financial Protection Bureau. "How to Understand Special Promotional Financing Offers on Credit Cards."

  8. Bank of America. "What Is a Credit Card Cash Advance?"

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