What is an interest free period?
Not to be confused with an interest free introductory offer, an interest free period is a standard feature on most credit cards that allows cardholders to save on interest month by month. In essence, this feature is designed to help you keep your interest costs at zero – as long as you abide by certain rules.
How do interest free periods on credit cards work?
You will usually see cards either offering up to 44 days interest free or 55 days interest free. While some cardholders may think this is the number of days interest free they get on all purchases, it is in fact, the maximum number of days interest free on offer. The number of days interest free you actually get will depend on when you make each purchase during your card’s statement cycle.
So, how does it work?
Emily has a credit card with a 30-day statement cycle. Her statement is due to be paid 25 days after each statement cycle ends. Depending on the date she makes each purchase, she can benefit from a maximum of 55 days interest free, before she has to pay her closing balance for the month.
When her statement is due on day 55, Emily pays her closing balance in full to make sure she continues to benefit from interest free days the following month.
How can you make your interest free period work for you?
With a little planning, you can make your interest free period work in your favour. Knowing exactly when your statement cycle starts, you can plan larger purchases, giving you longer to pay them off – while paying nothing in interest.
For example, if Emily had bought the laptop earlier in the statement cycle – or waited until the next statement cycle started – she could have taken advantage of more days interest free, with a longer time between purchase and when she had to pay it back.
It’s also worth bearing in mind that not all credit cards offer interest free periods, and those that do may offer longer or shorter interest free periods. If you want to make the most of interest free shopping when using your credit card, make sure to choose a card that offers interest free periods as a feature, with an interest free period that suits your spending style.
What do you need to know about interest free periods?
As you might expect, interest free periods come with small print. Here are some of the most important points to remember when utilising your credit card’s interest free period.