Credit with a Card

A credit card can be a handy way to borrow if you choose the right card and are smart about using it. Using credit this way doesn’t have to cost you a cent — provided the card has a grace period and you always pay the full amount you owe on time.

A grace period is the minimum of 21 days you have to pay your bill after the lender sends it to you. If you pay the whole thing in full by the day it’s due, there’s no finance charge.

But if there’s no grace period or if you pay only part of what you owe, using this type of credit will cost you money—potentially, big money. To figure your finance charge for the month, the lender multiplies 1/12th of your APR times your unpaid balance. That’s the interest you owe.

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