
by Money Girl
An anonymous podcast listener asks:
Do you only have to pay interest charges on a credit card if you carry a balance from one month to the next? Also, how does using a credit card help you boost your credit score?

This is a great back-to-basics question. If you don’t really understand how a credit card works, it’s easy to get into trouble using one.
Credit cards start charging interest the day you make a purchase, take a cash advance, or transfer a balance from another account. You’re typically charged a daily rate that’s equal to the card’s annual percentage rate (APR) divided by 365.
For instance, the APR for new purchases could be 11.99%, cash advances 23.99%, and balance transfers 5%. The balance for each of these transaction categories accumulates each day until you pay them in full.
The good news is that credit cards give you a grace period for purchases (but typically not for cash advances or balance transfers) that allows you to avoid interest on new charges if you pay your balance in full by the billing statement due date.
Continue reading ‘How is Credit Card Interest Calculated?’