Credit cards with interest-free days give you a period of time in your billing cycle when you can make purchases without being charged interest. To make use of this interest-free period, you usually have to pay your credit card balance in full by the due date on your statement.
What is the definition of “interest-free days”?
This term refers to a period of time in your billing cycle when you can make purchases without being charged interest on them. Interest-free days begin on the first day of your statement period and end on the payment due date. For example, if you made a purchase on day 1 of a statement period, you could have 55 days to pay it off before interest is applied to the balance.
This might be composed of the 30 day statement cycle, plus 25 days until the payment due date. A purchase made on the second day of that statement period would get 54 days interest-free, and a purchase made on day 30 would give you 25 days to pay it off before interest is charged.
Other key definitions you need to know
Before we go further into explaining this credit card feature, make sure you know what these terms mean:
Statement issue date/ billing cycle. This is the date on which the bank issues your monthly credit card statement.
Payment due date. The date by which you must pay the balance by to avoid late charges/ fees.
Purchase rate. The interest rate charged on purchases.
Answers to the most common questions about interest-free days
This means that you get 55 days interest-free on your purchases from the start of your billing cycle when you pay the balance in full by the due date on your statement. You get 55 days interest-free on the first day of that billing cycle, 54 on the second day, and so on.
To be eligible to receive interest-free days you must repay your account’s outstanding balance in full by the due date on your statement. Usually, you’ll need to pay the full balance for the statement prior to the start of that billing cycle as well as the statement issued at the end of it.
If you pay off your credit card balance in full by the due date each month, a card will interest-free days will allow you to make purchases without paying interest. This could be ideal if you use a credit card to earn rewards or for short-term cash flow such as spending between monthly paydays. But if you think you might not be able to pay the account’s closing balance in full each month, you may like to consider low interest rate credit cards and 0% purchase offer credit cards.
Compare cards with interest free periods
What should I be wary of when using a credit card with an interest-free days offer?
Using a credit card with interest-free days on purchases can be good if you know exactly what you’re doing. Here are some of aspects you should consider:
Making minimum monthly payments. If you’re planning to make no more than minimum monthly payments towards your credit card, know that you won’t get any interest-free days at all.
Eligible purchases. Interest-free days are only available for “eligible purchases” made on your card. While this usually includes everyday spending at the supermarket, petrol station, restaurants and so on, exclusions typically apply for cash advance transactions, government payments and some bill payments. Check with your credit card provider for details on what is considered an “eligible purchase” for your card.
Dates vary. Don’t expect all your credit cards to come with similar billing cycle dates and dues dates. These dates can vary from one card to the next, even when issued by the same card issuer.
Balance transfers. If you have a debt on your credit card from a balance transfer you may not be eligible for interest-free days on new purchases.
Making use of interest-free days
Let’s assume you have a credit card that offers 55 interest-free days and its billing cycle begins on the 1st of each month and ends on the 30th. Given the 55 interest-free days, the due date on your credit card statement would be the 25th of next month. So if you were making purchases in June, here’s how it would look:
1st June. First day of the statement
30th June. Last day of the statement
25th July. Due date of your payment for June
In this case, the 55 interest-free days begin on 1st June and end on the 25th July when your payment is due. So here’s how your interest-free period would work as you make purchases throughout the month:
You make a $200 purchase on 1st June. You don’t have to pay any interest towards this purchase until 25th July, which gives you 55 interest-free days.
You make a $100 purchase on 20th June. This is the 20th day of your billing cycle, so you don’t have to pay any interest towards the purchase until 25th July. This means you get 35 interest-free days.
You make a $150 purchase on 30th June. This is the last day of your billing cycle but the purchase won’t attract any interest until 25th July, giving you an interest-free period of 25 days.
When you’re statement is issued for June, you’ll owe $450. So as long as you pay this in full by the 25th July, you won’t be charged interest on your purchases and can continue to enjoy interest-free days for the next billing cycle.
Diagram: How do interest-free days work?
Interest-free days can be tricky to visualise, so we’ve drawn up a handy diagram you can use to see how it works. As well as showing the interest-free period (in green), we also show when purchases are made, when the statement is issued and what happens if you pay less than the full amount for a billing cycle (the middle one in this case).
Credit cards that come with 55 interest-free days give you the ability to make purchases and not pay any interest towards them as long as you make timely repayments and meet any other requirements. Such cards can come with a number of other features as well, so it’s important that you choose a card as per your requirement. Bear in mind that just about every credit card issuer provides cards with interest-free days on purchases, so it is in your most interest to compare as many as possible before making a decision.
More Frequently Asked Questions about interest-free period credit cards
With New Zealand credit cards that offer interest-free days, the maximum interest-free days you can take advantage of may vary between 44 and 55, depending on the card you use.
Additional cards linked to your primary card follow the same billing cycle as the primary card and offer just as many interest-free days on purchases.
Once you start paying your account’s closing balance in full each month again, you can start making use of interest-free days on purchases.
Andrew Munro is the global cryptocurrency editor at Finder. After previously writing about insurance and other areas, he now covers the latest developments in digital assets and blockchain and works on Finder's comprehensive range of guides to help people understand cryptocurrency.
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