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.