When Do Credit Cards Charge Interest?
5 Min Read | Published: June 20, 2025
This article contains general information and is not intended to provide information that is specific to American Express products and services. Similar products and services offered by different companies will have different features and you should always read about product details before acquiring any financial product.
When do you get charged interest on credit card purchases? See when interest charges happen, key grace period exemptions, and how to save on credit card interest.
At-A-Glance
- Credit cards may have an Annual Percentage Rate (APR), which is what you’re charged for borrowing money.1
- While there may be a grace period where you may not be charged interest on most purchases, some transactions are exempt from grace periods.2
- You can save on credit card interest charges by understanding due dates and paying your balance on time and in full.
Credit card issuers often charge interest on purchases when you don’t repay the credit you’ve used within the statement billing cycle. Knowing how interest is charged can help you save money on interest payments and manage your credit card debt wisely.
When Do You Get Charged Interest on a Credit Card?
Credit card interest may be charged on your monthly unpaid balance, but it usually accrues on a daily basis.3 This daily interest rate is equal to your monthly APR divided by 365. So, a card with a 14.99% APR would have a daily interest rate of 0.0411%.
Credit card interest rates are assessed to your account based on your billing cycle. Interest compounds each day based on your account balance and is added to your balance for the next day. At the end of the monthly billing cycle, all these daily interest charges are added up and added to your balance as an interest charge.
Some credit cards have a grace period from the close of a billing cycle to your payment due date. This can be at least 21 days, but will vary, depending on the credit card issuer.4 If your credit card has a grace period, paying your statement balance in full by the due date can help you avoid interest on most purchases.5 However, it’s important to keep in mind that some credit cards may not offer an interest-free grace period.6 Always read the terms and conditions of your credit card agreement to understand when a credit card charges interest.
What Is Exempt from Credit Card Grace Periods?
Different credit cards may have different terms and rules regarding grace periods, but some transactions may be exempt from grace periods. These include:7
- Balance Transfers
A balance transfer is when you move your existing credit card debt from one card to another with a lower interest rate. These transfers can be subject to interest immediately, unless you have a balance transfer card with a 0% introductory interest rate. - Cash Advances
A cash advance is when you withdraw cash from your available line of credit on your credit card, such as making a withdrawal from an automatic teller machine (ATM). In this case, interest may start accruing right away. - Transactions With Convenience Checks
Convenience checks allow you to write a check for a purchase that draws upon your available credit. When you do this to make a purchase or pay a vendor, it may incur interest charges.
Do You Have to Pay Interest If You Pay Your Minimum Balance Due?
Purchase interest charges may be assessed against your statement balance. However, as we’ve seen, there are other situations where interest charges may apply. However, credit cards may only require a minimum payment for you to avoid late penalties and additional fees. Paying the minimum balance due can reduce fees, but it will not help you avoid interest charges. Paying your statement balance in full by the payment due date can help you avoid purchase interest charges.
How to Save on Credit Card Interest
Credit card interest charges can add up, so it’s important to find ways to reduce the interest you owe. Here are a few strategies to try:
- Pay Your Statement Balance
Paying your full balance by the payment due date can help you avoid purchase interest charges on your credit card’s balance. - Observe Due Dates
Make sure you understand your billing cycle and payment due dates so you always pay on time. - Avoid Cash Advances
Features like cash advances and convenience checks may be useful for certain purchases, but they do not have a grace period. You’ll want to carefully consider the pros and cons before making a cash advance.
Frequently Asked Questions
In some cases, you may still be charged residual interest. This is the interest that accrued on your balance between the time the statement was issued and when your payment is processed.8
Usually, you will not owe purchase interest on a zero balance. However, there may be exceptions, like if you owe residual interest or you withdrew a cash advance during the billing cycle.
Credit card issuers are required to give 21 days’ notice before closing a billing cycle, but that does not guarantee that the time-frame will be interest-free.9 Usually, paying your statement balance in full by the due date can help you to avoid paying interest, but this will depend on your credit card in question and in some cases, the type of transactions you’ve done.
The Takeaway
Credit cards offer a convenient form of financing, and some allow you to earn rewards like points or cash back on eligible purchases. However, interest charges can compound if you carry a sizable balance from month to month, so it’s important to understand how credit card interest works. Paying off your statement balance on time and in full each month can help you save money on interest.
1,3 "Understanding Credit Card Interest," Investopedia
2,6,7 "How your grace period lets you avoid paying interest on a credit card," Bankrate
4,9 "How to Use a Credit Card Grace Period to Your Advantage," Experian
5 "Credit card statement balance vs. current balance: Which to pay?," CNBC
8 "Residual Interest: What it is, How it Works, Example," Investopedia
Nick Perry writes about personal finance, real estate, insurance and other complicated topics that need simplifying. He lives in Melrose, Massachusetts with his wife, son, and dog, Goose.
All Credit Intel content is written by freelance authors and commissioned and paid for by American Express.
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