Credit Card Interest Trap

Written on the 7 March 2011 by G. Dean McKinnon

The vast majority of credit card companies do not charge you interest for purchases (not cash advances), if you pay off the entire amount owing by the due date, but if you are $1.00 short they will charge you interest on the entire amount outstanding.

We recently had a client who had mistakeningly paid his credit card bill short by some miniscule amount and was charged interest on the entire bill for the month, even though he had paid 99.99% of the amount due.

If you are charging all of your expenses to your credit card each month, the unexpected interest cost could be significant, so remember to double-check all payments are made in full when due.