Can I avoid a finance charge on some forms of credit?


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finance charge credit problems

Can I avoid a finance charge on some forms of credit?

Yes. Many credit cards enable you to pay the entire outstanding credit amount within a certain time period without incurring any finance charge. By paying off your credit balance within the grace period (which must be at least two weeks from the receipt of the bill), you receive what amounts to an interest-free loan. The creditor still makes money by charging the seller (such as a department store or other retailer) a fee to process their credit card transactions, so the lenders collect from the retailer an amount that covers their cost of these short term loans.The credit card company may also charge you an annual fee.

Cards such as American Express and Diners Club expect you to pay off the balance each month and usually have no finance charges.

(Reviewed 10.31.2008)

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