What does “up to 55 days interest-free” really mean?

Most credit cards come with up to 55 or 56 days of 0% interest on your purchases. So what do you need to do to take advantage of this significant perk?

When you start making purchases on your new credit card, you’ll receive your monthly statement with a date before which you must pay at least a minimum payment towards your outstanding balance. But if you clear the full balance (rather than making a part-payment towards it), you usually won’t pay any interest at all on your purchases. As such, a purchase made right at the start of your billing cycle could remain interest-free for as much as 56 days.

How to use your interest-free days

  1. Make eligible purchases. Your interest-free period applies to purchase transactions, but usually excludes balance transfers, cash advances (using your credit card to withdraw cash or get cash out at the till) and sometimes utility payments and government charges. Interest usually starts to accrue on those types of transactions from the moment they take place.
  2. Pay your statement in full. You must clear your entire credit card balance by the payment due date on each statement to be eligible for this interest-free period. Once you have an outstanding balance, the interest-free period no longer applies, and interest will accrue each day on all your transactions, backdated to the date on which you made the purchase.

It’s easy to get confused about this though because many cards also come with an introductory, one-off interest-free promotion. So the card you’re thinking of getting might come with 24 months 0% interest on purchases AND up to 55 days 0% interest on purchases. In that scenario, the 55 interest-free days probably wouldn’t be of interest to you until after your introductory offer had expired.

You can use this guide to find answers to the most common questions about interest-free days, compare credit cards with interest-free days and learn about the key factors to be aware of when using an interest-free card.

Example: Making use of interest-free days

Let’s assume you have a credit card that offers “up to 55 interest-free days” and its billing cycle begins on the first 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:

  • 1 June. First day of the statement
  • 30 June. Last day of the statement
  • 25 July. Due date of your payment for June

In this case, the 55 interest-free days begin on 1 June and end on the 25 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 £100 purchase on 1 June. You don’t have to pay any interest towards this purchase until 25 July, which gives you 55 interest-free days.
  • You make a £50 purchase on 20 June. This is the 20th day of your billing cycle, so you don’t have to pay any interest towards the purchase until 25 July. This means you get 35 interest-free days.
  • You make a £150 purchase on 30 June. This is the last day of your billing cycle but the purchase won’t attract any interest until 25 July, giving you an interest-free period of 25 days.

When your statement is issued for June, you’ll owe £300. So as long as you pay this in full by 25 July, you won’t be charged interest on your purchases and can continue to enjoy interest-free days for the next billing cycle.

* This is a fictional, but realistic, example.

The dos and don’ts of interest-free days

Do

  • Spend within your credit limit.
  • Set up a direct debit to clear your balance in full each month.
  • Keep an eye on your card statements to make sure your transactions aren’t incurring interest.

Don’t

  • Withdraw cash on your credit card (if it can be avoided).
  • Carry a balance from month-to-month (if it can be avoided).
  • Use your card for ineligible transactions.

Paying your card bill by direct debit

When you get a new credit card, you’ll usually be given the chance to set up a direct debit to make repayments. It’s advisable to do so because it guarantees that you won’t miss a payment, which would get you into hot water with your card issuer and damage your credit record.

You’ll usually be given 2 options:

  1. Set up a direct debit to repay the minimum amount payable each month. The minimum payment, as specified in your terms and conditions, is typically a percentage of your outstanding balance or a specified figure – whichever is greater. For example “3% (minimum £5)”. If you only pay the minimum required amount, you won’t benefit from interest-free days and your debt will take longer to clear.
  2. Set up a direct debit to repay the full balance each month. This option will allow you to benefit from interest-free days on eligible transactions.

Other key definitions you need to know

When you’re learning about interest-free days, you’ll often come across a number of other terms that relate to this feature. Here are some of the major ones to take note of:

  • Statement period/billing cycle. The statement period usually runs for 1 month or from when your last statement was issued to when the next one is issued.
  • Statement issue date. 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 to avoid late charges/fees. If you want to get interest-free days, you’ll usually have to pay your full balance by this date.
  • Purchase rate. The interest rate charged on purchases, also referred to as the “standard” rate. Interest-free days help you avoid this cost.

What else do I need to know when using a credit card with interest-free days?

You can use a credit card with interest-free days to save on your account costs when you meet specific requirements. Here are the key details to keep in mind so you can make use of your interest-free days:

  • Minimum monthly payments. You usually can’t get interest-free days for purchases if you only pay the minimum amount required on your statement, as most credit cards only offer this benefit when you pay your balance in full by the due date.
  • 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 cycles and due dates. These dates can vary from one card to the next, even when issued by the same card issuer.
  • Balance transfers. Usually, if you have a debt on your credit card from a balance transfer, you won’t be eligible for interest-free days on new purchases. If you want to transfer a balance and make purchases without interest, you could also consider a card with an introductory rate of 0% for purchases and balance transfers.

Answers to the most common questions about interest-free days

Bottom line

Credit cards that come with interest-free days give you the ability to make purchases and not pay any interest towards them as long as you clear your full card balance each month. Such cards can come with a number of other features as well, so it’s important that you choose a suitable card for your requirements. Bear in mind that just about every credit card issuer provides cards with interest-free days on purchases, so it is in your best interest to compare as many as possible before making a decision.

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