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Credit cards typically charge a higher annual percentage rate (APR) versus other forms of consumer loans. Interest charges on any unpaid balances charged to the card are typically imposed approximately one month after a purchase is made (except in cases where there is a 0% APR introductory offer in place for an initial period of time after account opening), unless previous unpaid balances had been carried forward from a previous monthin which case there is no grace period granted for new charges.

By law, credit card issuers must offer a grace period of at least 21 days before interest on purchases can begin to accrue.1 That’s why paying off balances before the grace period expires is a good practice when possible. It is also important to understand whether your issuer accrues interest daily or monthly, as the former translates into higher interest charges for as long as the balance is not paid. This is especially important to know if you’re looking to transfer your credit card balance to a card with a lower interest rate. Mistakenly switching from a monthly accrual card to a daily one may potentially nullify the savings from a lower rate.

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