Trailing interest tactics

Financial counselors say that with a little effort and enough ready funds, you may be able to make the jump to interest-free status in a single month. Joanne Kerstetter, vice president for education at Money Management International, recommends not waiting for your statement to arrive. If you go online and check your full balance on the last day of the billing cycle, and pay this amount immediately via online bank transfer, that will halt trailing interest charges from seeping over into the next billing cycle. Then if you resume paying your full balance by the due date on your next monthly statement, your grace period on purchases should be reinstated. It's a good idea to check with your card company to be sure this will work. Not all card agreements explicitly say that the break on interest resumes the month after you zero out your ending balance in this manner.

Trailing interest can be a sneaky pitfall if you aren't vigilant about your account. "Some people will pay the full balance and not check their next statement," Kerstetter said. People who think they've wiped their slate clean by paying off their full balance for a single month, and who don't check the next month's statement, might miss the few dollars of trailing interest. If that goes unpaid by the due date it can lead to late fees and, eventually, a demerit on your credit. "You have to realize that your next statement will reflect interest from the closing date," Kerstetter said.

Interest on disputed charges

What happens if you don't pay a charge by the due date because you are disputing it? Under the Fair Credit Billing Act, you can withhold payment on disputed charges while the creditor investigates without being charged interest. If you do, you take the chance of getting hit with interest on the disputed charge if your dispute falls flat. However, issuers say that the grace period on other purchases is safe -- it won't be affected by the disputed amount.

Many disputes are a slam dunk, such as mistaken double bills, or bills for unauthorized, undelivered merchandise. Frequently, however, disputed bills don't qualify for credit card charge-backs, Feddis said, such as when trying to return a product that you received but decided you don't want. "Some people say 'it's not the right color,'" she said. If the merchant's return policies don't entitle you to a refund, the charge could wind up back on your balance -- with interest. Your card may waive the finance charge on a disputed purchase if you are paying off your other purchases -- it doesn't hurt to ask -- but under the Fair Credit Billing Act, the lender is entitled to charge back interest on the disputed amount.

If the card won't waive the interest, you could pay the disputed charge provisionally, pending the outcome of the dispute, Feddis said. If the dispute is not clear cut, consider paying -- making sure to lodge your dispute first and indicate that your payment is provisional. It is better to wind up with a credit on your statement than to risk getting hit with back interest.

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