Credit Card FAQ
How To Play-the-Float with your Credit Card?
In relation to credit card accounts, "float time" is the name given to the period of time between making a purchase on your credit card and your credit card issuer charging interest on that purchase, usually the due date of your payment. There is no interest charged on this borrowing during that time. If you always pay of your balance each month you will have no need to worry about the account "float."
When you "float" a credit card balance, you are extending the length of time you have left before you need to pay the balance in full while still avoiding paying finance charges. In order to float a credit card, you will need to keep track of your due date, closing date, your current balance and the date you make purchases. Floating your credit card balance is sometimes known as "playing the float."
How To Take Advantage of Float Time?
Many consumers take full advantage of the interest free float time on their credit card. Instead of paying bills from a checking account with your wages, you can pay as much as possible on your credit card, effectively using the banks money instead of your own.
You can then pay off the balance of the card at the end of the month, avoiding any interest. In the mean time you could use the wages elsewhere for reducing debts, or perhaps leave them in a high yield savings account until the credit card bill is due. However, it is important to watch those due dates carefully as missing one will result in often hefty fees.
When Does Float Time Not Apply?
It is important to remember that you can only float purchases. When you make a purchase, the interest is not added until your payment is due. However, if you take out a cash advance on your credit card account, the finance charges and interest begin to accrue immediately preventing the opportunity to float it to the next cycle.
How You Float Your Credit Card Balance?
In order to float your credit card balance you must first contact your credit card issuer and find out your due date and your closing date. The due date is when your balance or minimum payment is due to be repaid.
The closing date is the cut off at the end of the billing cycle and is also the day your balance is reported to the credit reporting agencies. In general, statements are mailed out the day after the closing date and the balance is due approximately 3 weeks after that.
Once you know the closing date for your account, you should make your purchases on the day after that. Any purchase made on this day will not appear on your statement for the month. The purchases will show up on the statement for the following month.
You will then have 20 days after the statement is issued before payment is due. This allows you to float the balance for around 50 days with no interest or extra charges. You must make your payment by the due date in order to avoid any charges.
In conclusion, floating your credit card balance, also known as "playing the float," can be a useful way to make your money work harder for you. Banks and insurance companies play the float often by investing client's money before allocating it to its designated place. Credit card account holders can play the same game.
However, it requires a level of commitment to keeping track of dates and purchases. The system does not work well if you are carrying a balance on your card as it is more suited to cardholders who pay the balance off in full every month.
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