What is the 90-Day Rule for Credit Cards?

What is the 90-Day Rule for Credit Cards?

Credit cards are a convenient way to make purchases, but they also come with certain rules and regulations. One such rule is the 90-day rule, which is designed to protect both the credit card issuer and the cardholder.

What is the 90-day rule?

The 90-day rule is a policy that some credit card issuers have in place to prevent fraud and abuse. Essentially, the rule states that any new purchases made within the first 90 days of opening a credit card account will not be covered by the card'sgrace period.

What is a grace period?

A grace period is a period of time during which a credit card holder is not charged interest on their purchases. This period typically lasts between 21 and 25 days, and it starts on the statement closing date. If the cardholder pays their balance in full before the end of the grace period, they will not be charged any interest.

How does the 90-day rule affect the grace period?

If a cardholder makes a new purchase within the first 90 days of opening their account, that purchase will not be covered by the grace period. This means that interest will begin accruing on that purchase from the date it is made, even if the cardholder pays their balance in full at the end of the billing cycle.

Why do credit card issuers have the 90-day rule?

Credit card issuers have the 90-day rule in place to protect themselves from fraud and abuse. By not covering new purchases made within the first 90 days, they are able to verify the legitimacy of the account and ensure that the cardholder is not using the card for fraudulent purposes.

What should cardholders do to avoid the 90-day rule?

To avoid the 90-day rule, cardholders should wait at least 90 days before making any major purchases on their new credit card. They should also be sure to read the terms and conditions of their card carefully to understand how the grace period works and what purchases are covered.

Investment strategies for credit card holders

For those who use credit cards for investment purposes, it is important to understand the 90-day rule and how it can impact their investments. One strategy is to use a credit card with a high cashback or rewards program to make purchases, and then pay the balance in full before the grace period ends. This can help cardholders earn rewards while avoiding interest charges.

Another strategy is to use a credit card to invest in stocks or other securities. While this can be risky, it can also be profitable if done correctly. Cardholders should be sure to do their research and consult with a financial advisor before using a credit card for investment purposes.

Conclusion

The 90-day rule is an important policy for credit card issuers and cardholders alike. By understanding how it works and how it can impact their finances, cardholders can make informed decisions about how to use their credit cards and avoid unnecessary fees and charges.