How to Avoid Credit Card Finance Charges

A finance charge is the fee you pay for carrying a balance on your credit card. Finance charges increase the cost you pay for having a credit card. Avoiding finance charges is one way to lower the cost of having a credit card.

How to Avoid a Finance Charge

When you make a purchase on your credit card, you have a grace period. If you pay your balance in full during the grace period, you won't have any finance charges on your balance. Your grace period is typically listed on the front or back of your billing statement. Your statement may even include a disclosure stating the date by which your payment must be received to avoid finance charges. If you leave the balance on the credit card beyond the grace period, you'll see finance charges on your next billing statement.

Finance Charges You Can't Avoid

If you had a balance at the beginning of the billing cycle, you may not be able avoid a finance charge. Many credit card issuers only give a grace period when your previous balance was paid in full.

You may not be able to avoid finance charges on all types of balances. For example, balance transfers and cash advances don't have a grace period, so finance charges start accruing as soon as the balance hits your card. When it comes to these types of balances, the best way to avoid a finance charge is to stay away from balance transfers and cash advances completely. The exception is when your credit card has a 0% interest rate promotion. You can leave a balance on the credit card and still avoid a finance charge as long as the promotion is in effect. Pay your balance in full before the promotion ends to avoid a finance charge when the 0% interest rate offer expires.