How your credit card interest-free period works

Learn exactly how your credit card interest-free period works to avoid paying any interest.

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Credit card interest, statement cycles and billing periods can be confusing concepts. As a result, people may unknowingly incur interest fees which could then lead to serious debt. One way to avoid these charges is to take advantage of the interest-free days offered by many credit cards. Use this guide to understand how the interest-free period works and how you can use your credit card to manage your cash flow without accruing debt.

Hawaiian shirts and interest free days

When does the interest-free period start?

Your interest-free period begins on the first day of your credit card statement cycle and ends on the payment due date for that statement. For example, if your card offers an interest-free period of 55 days and your billing or statement cycle begins on 1 April, you will get 55 days for purchases made on that day, 54 days for purchases on 2 April and so on. This means that at the end of April (which is a 30-day month) you will have 25 interest-free days left to pay for your eligible transactions. The due date for your statement would be 25 May in this scenario. So if you have a purchase in mind and want to take full advantage of the interest-free days, try to make the purchase as early in the statement period as possible.

How can I use interest-free days on my credit card?

It is crucial that you fulfill these two key requirements in order to enjoy your interest-free period:

  • 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.
  • Make eligible purchases. Your interest-free period applies to purchase transactions, but excludes balance transfers, cash advances, and most utility payments and government charges. Interest accrues on those types of transactions from the moment they take place.

Interest-free period

Here’s an example of how someone can take full advantage of their interest-free period. Karen’s credit card offers her 44 interest-free days, and her billing cycle starts each month on the 5th. Karen diligently pays off her full account balance every statement cycle, and enjoys the interest-free period because of this.

On 5 September, Karen bought a new computer for $2,000 – a purchase which would be eligible for the full 44 interest-free days (until the statement due date on 19 October). On 30 September, her car breaks down and Karen charges the purchase of parts to her card for $3,000. This purchase will only get 19 interest-free days. This means Karen will have to pay her card balance of $5,000 before 19 October in order to enjoy her interest-free period for September.

credit-card-interest-free-diagram

Compare up to 55 days interest-free credit cards

Updated January 25th, 2020
Name Product Purchase rate (p.a.) Balance transfer rate Annual fee
HSBC Platinum Credit Card - Balance Transfer Offer
19.99% p.a.
0% p.a. for 22 months
$129 p.a.
Enjoy a balance transfer offer, yearly annual fee refund, airport lounge passes and complimentary insurance covers.
St.George Vertigo Classic
13.99% p.a.
0% p.a. for 18 months
$55 p.a.
Get 0% p.a. interest for up to 18 months on balance transfers with no balance transfer fee. Plus, a low annual fee and purchase rate.
Latitude 28° Global Platinum Mastercard
21.99% p.a.
$0 p.a.
Save with 0% foreign transaction fees on purchases. Plus, complimentary flight delay passes and a global wifi access.
Virgin Australia Velocity Flyer Card - Balance Transfer Offer
20.74% p.a.
0% p.a. for 22 months
$129 p.a.
Save with a 0% p.a. interest rate on balance transfers for the first 22 months. Plus, collect up to 30,000 bonus Velocity Points.
Bankwest Breeze Classic Mastercard
12.99% p.a.
0% p.a. for 26 months with 2% balance transfer fee
$39 p.a. annual fee for the first year ($79 p.a. thereafter)
0% interest on balance transfers for the first 26 months, with a 2% balance transfer fee. Plus, a discounted first year annual fee.
St.George Vertigo Platinum
0% for 15 months, reverts to 12.99% p.a.
$49 p.a. annual fee for the first year ($99 p.a. thereafter)
Features an introductory 0% p.a. purchase rate, $49 first year annual fee and complimentary travel insurance covers.
St.George Vertigo Card - Exclusive Offer
0% for 14 months, reverts to 13.99% p.a.
0% p.a. for 6 months
$0 p.a. annual fee for the first year ($55 p.a. thereafter)
Finder Exclusive:
Low rate card offering 0% p.a. interest on purchases for the first 14 months and on balance transfers for 6 months. Plus, a $0 first year annual fee.
Westpac Low Rate Card
2019 Winner
Westpac Low Rate Card
13.74% p.a.
0% p.a. for 16 months
$59 p.a.
A no frills, low rate card offering 0% p.a. interest on balance transfers for the first 16 months, with no balance transfer fee.
Bank of Melbourne Vertigo Classic
13.99% p.a.
0% p.a. for 18 months
$55 p.a.
Enjoy 0% p.a. interest for up to 18 months on balance transfers. Plus, a low annual fee and competitive purchase rate.
St.George Amplify Platinum - Online Offer
19.74% p.a.
0% p.a. for 22 months
$99 p.a.
Get 100,000 bonus Amplify Points when you spend $2,000 in the first 90 days. Plus, a balance transfer offer of 0% interest for 22 months.
American Express Velocity Escape Card
20.74% p.a.
0% p.a. for 12 months with 1% balance transfer fee
$0 p.a.
Earn uncapped Velocity Points on purchases and save with a $0 annual fee for life and a 0% p.a. for 12 months balance transfer offer.
American Express Velocity Platinum Card
20.74% p.a.
0% p.a. for 12 months with 1% balance transfer fee
$375 p.a.
Get 100,000 bonus Velocity Points when you spend $3,000 for the first 3 months. Plus, 100 Status Credits and luxury travel perks.
NAB Low Rate Platinum Card
0% for 15 months, reverts to 13.99% p.a.
0% p.a. for 6 months with 2% balance transfer fee
$100 p.a.
Enjoy a 0% p.a. interest rate offer on purchases for 15 months and the protection of 7 complimentary insurances including overseas travel insurance.
Bank of Melbourne Amplify Signature
19.74% p.a.
0% p.a. for 6 months
$139 p.a. annual fee for the first year ($279 p.a. thereafter)
Receive up to 200,000 bonus Amplify Points (130k in the first year & 70k in the second year) when you spend $12k / year for the first 2 years.
BankSA Vertigo
13.99% p.a.
0% p.a. for 18 months
$55 p.a.
Enjoy a 0% p.a. interest rate for up to 18 months on balance transfers. Plus, a low annual fee and purchase interest rate.
Bank of Melbourne Amplify Platinum
19.74% p.a.
0% p.a. for 6 months
$99 p.a.
Get a $400 e-gift card when you spend $3,000 on eligible purchases within 90 days of card approval. Plus, complimentary insurance covers.
BankSA Amplify Platinum - Qantas
19.74% p.a.
0% p.a. for 6 months
$99 p.a.
Receive 60,000 bonus Qantas Points when you spend $2,000 within 90 days and earn up to 0.5 Qantas Points per $1 spent.
Bank of Melbourne No Annual Fee Card
20.74% p.a.
0% p.a. for 12 months with 1% balance transfer fee
$0 p.a.
Enjoy 0% p.a. for 12 months on balance transfers, up to 55 days interest-free on purchases and no annual fee for the life of the card.
BankSA No Annual Fee
20.74% p.a.
0% p.a. for 12 months with 1% balance transfer fee
$0 p.a.
Offers a 0% p.a. for 12 months balance transfer, up to 55 days interest-free on purchases and an ongoing $0 annual fee.
St.George No Annual Fee
20.74% p.a.
0% p.a. for 12 months with 1% balance transfer fee
$0 p.a.
Receive up to 55 days interest-free on purchases, a low minimum credit limit of $500 and a long-term balance transfer offer.

Compare up to 4 providers

Compare up to 44 day interest-free credit cards

Updated January 25th, 2020
Name Product Purchase rate (p.a.) Balance transfer rate Annual fee
Virgin Money Low Rate Credit Card
11.99% p.a.
0% p.a. for 14 months
$49 p.a.
Get a $49 annual fee, 10% cashback on purchases made in the first 3 months (capped at $100) and a 14-month balance transfer.
Qantas American Express Ultimate Card
20.74% p.a.
0% p.a. for 12 months with 1% balance transfer fee
$450 p.a.
Get 55,000 bonus Qantas Points, a $450 Qantas Travel Credit and 2 yearly complimentary Qantas Club lounge invitations.
NAB Rewards Business Signature Card
18.5% p.a.
$175 p.a.
Earn 100,000 bonus points when you spend $4,000 on everyday business purchases in the first 60 days of account opening. ABN required.
Virgin No Annual Fee Credit Card
18.99% p.a.
0% p.a. for 12 months
$0 p.a.
Offers 0% p.a. for 12 months on balance transfers and up to 55 days interest-free on purchases, all for a $0 annual fee.

Compare up to 4 providers

What happens if I carry a balance?

Unfortunately the short answer is that you may have to pay interest through the nose. Carrying a balance not only affects the interest-free period for that statement cycle, it also affects the next one because the next cycle will inevitably start with an outstanding balance on your card. This means that until you clear the full balance on your next statement cycle, you will not be eligible for interest-free days, and interest will be charged immediately from the transaction date of every purchase you make.

Important: Note that this situation also applies if you transfer a balance to your new credit card. As long as there’s an outstanding balance on your card, you will not enjoy the advertised interest-free period.

Learn what happens when you carry a credit card balance

Other types of interest-free periods

As well as the interest-free period on purchase transactions, there are some other interest-free offers you may find on your credit card:

  • Promotional 0% purchase rate offers. This type of deal provides you with a 0% interest rate on purchases for the first 3-12 months. After that, the standard variable rate of interest will apply to purchases (unless you take advantage of interest-free days).
  • Promotional 0% balance transfer offers. A balance transfer credit card promotion could offer an interest-free introductory period for between 3 and 24 months. While this means you can enjoy paying 0% interest on your transferred balance for that stipulated period of time, you may have to pay a balance transfer fee initially, and you’ll still have to make minimum repayments on your balance each month. Other fees may apply (e.g. annual fee, late fee, etc.) and, as explained earlier, you will not enjoy the interest-free period on purchase transactions until you’ve paid your balance in full.
  • Interest-free payment plans. Some credit cards provide interest-free options for selected purchases. Examples of some of these are the Gem Visa, Myer Visa and the David Jones American Express credit cards.

Tips for using the interest-free period

Consider the following tips if you want to take advantage of interest-free days on your credit card:

  • Plan your purchases. Interest-free periods may vary from 14 to as long as 62 days. Whatever the case, it’s a good idea to make larger purchases at the beginning of a billing cycle so that you’re getting the greatest number of interest-free days.
  • Look at your statement regularly. Stay on top of your credit card bill by checking your online statement regularly. This will help you plan your repayments and better manage cash flow.
  • Prioritise repayments over purchases. If you have an outstanding balance, focus on paying it off in full before making any new purchases. This strategy will help reduce the amount of interest you incur and help you meet the requirements for interest-free days in future billing cycles.
  • Only buy what you can afford. As you’ll need to pay off your balance in full each month, it’s important to only use your card for expenses you can afford to repay by the statement due date.
  • Set a budget. Creating a budget for your credit card expenses and repayments will help ensure that you can settle your monthly balances and continue to take advantage of the interest-free period on your card.

Armed with this knowledge of how your credit card interest-free period works, you can now plan your purchases and repayments to make the most use of those interest-free days. Always remember the bottom line though: pay your balance in full!

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Credit Cards Comparison

Updated January 25th, 2020
Name Product Purchase rate (p.a.) Balance transfer rate Annual fee
HSBC Platinum Credit Card - Balance Transfer Offer
19.99% p.a.
0% p.a. for 22 months
$129 p.a.
Enjoy a balance transfer offer, yearly annual fee refund, airport lounge passes and complimentary insurance covers.
St.George Vertigo Classic
13.99% p.a.
0% p.a. for 18 months
$55 p.a.
Get 0% p.a. interest for up to 18 months on balance transfers with no balance transfer fee. Plus, a low annual fee and purchase rate.

Compare up to 4 providers

* The credit card offers compared on this page are chosen from a range of credit cards finder.com.au has access to track details from and is not representative of all the products available in the market. Products are displayed in no particular order or ranking. The use of terms 'Best' and 'Top' are not product ratings and are subject to our disclaimer. You should consider seeking independent financial advice and consider your own personal financial circumstances when comparing cards.

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