How do you bring a credit card back into no-interest mode after making a less-than-full payment?


I realize I can stop interest charges at a point in time (not retroactively) on the already outstanding balance simply by paying it off. However, what is the optimal strategy to stop the interest charges on the current month's upcoming expenses (with 3 weeks remaining on the month)?

Pay the whole entire existing balance to zero and stop using the card.

You need to check with your bank but, far and away the most common methodology of calculating interest would require you to pay the statement balance to zero for two consecutive statement periods.

You pay $500 of a $1,000 statement. The remaining $500 balance, and all charges occurring after your due date, will now accrue interest. If you pay the whole balance on the 5th day after your due date you will still have had a balance for 5 days that will be captured in your average daily balance calculation for interest charges. If you stop using the card and pay the full balance you at least turn off the interest spigot but you will still receive a statement with a charge for the interest that accrued in those first five days. This is the fastest way to stop interest charges.

Alternatively you can simply pay the statement balance for two consecutive periods.

This is how almost all national banks calculate interest. If you happen to use a credit union or smaller regional bank, some have more generous interest terms where the interest calculation will include only the 5 days of the statement period where you carried a balance and won't include charges for the remaining days of the period but you should check with them.

There is no harm in calling your bank and asking how things work. If you've been a good customer for a sufficiently long time ask for a lower rate. I once needed to make a large purchase, so I called all my relevant banks to see if any would play ball and one (Discover) agreed to give me 0% on anything charged in the month. Tons of banks have provisions to delay or suspend interest for deployed military and I know Ally is directly advertising to government employees affected by the shut down. Just call the bank(s) and see what's possible.


Let me just add one thing to the above answers. While you are in that window between your partial payment and your full payment. Remember you are paying interest on new purchases day one. So I try and run a zero balance until that period is over with and use a different card.

Which leads me to another point. If you are running a balance then pay your credit card when you have money do not wait for the bill. You are accruing interest daily.

Mark


If you are carrying a balance on your credit card (for whatever reason) and so the most recent statement that you received included finance charges -- say $X as (previous balance plus purchases made that month) and $Y as (interest for that month plus fees and other charges) for a total statement balance of $Z = $X+$Y -- then paying off that statement balance $Z$ in full on or before the due date shown on your statement does stop interest being charged on your balance from that payment day forward. But, interest has been accruing in your account on that $Z (as well as on any purchases made/cash advances taken etc after the statement closing date) and this interest is not shown anywhere on your credit card website. You will see purchases made since the last closing date as adding on to your balance as shown on the credit card company's website, and if you are making a payment through the website, you do have the option of paying off the last statement balance or the current balance (or the minimum required payment etc) but none of these numbers include the accrued interest which will not be included in your current balance until the next statement is cut.

So, it takes two cycles of paying the monthly statement balance in full by the due date to get into the state of nirvana where the "Finance Charge" line on your monthly statement shows 0.