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Interest Free LoanOne of the big advantages of paying with a credit card is that you are getting an interest free loan on your money from the time you make a purchase with your credit card until the time you actually have to pay your credit card bill. The actual time will vary depending on when you make the purchase and when your credit card payment date is set, but if you have your money in an interest bearing bank account during that period, it is free money to you. This would not be the case if you made the same purchase with cash or a check.
The time that you are given between the time you make a purchase and have to pay your credit card bill is called the grace period. The grace period varies from credit card to credit card so you need to check with your credit card's terms to be sure, but grace periods usually last between 3 weeks and a month.
To take advantage of this perk, you need to leave the money that you're going to use to pay off the credit card in an interest bearing account. You also need to make sure that you pay off the credit card in full each month so that you aren't paying interest on the money.
Currently there are some credit cards that offer 0% interest for specified periods before the regular interest rate kicks in. In these cases, you can keep your money in an interest bearing account even longer and then pay off the credit card only when interest will start being charged.
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