How your credit card interest-free period works

Information verified correct on December 10th, 2016

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

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.

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.

Case Study

karen-case-study

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.

interest-free-days-cc-diagram

Compare up to 55 days interest-free credit cards

Rates last updated December 10th, 2016
Purchase rate (p.a.) Balance transfer rate (p.a.) Annual fee
St.George Vertigo Platinum
A platinum card with a balance transfer offer of 0% p.a. for 18 months and an introductory purchase offer of 1% p.a. for 12 months with an annual fee waiver for the first year.
1% p.a. for 12 months (reverts to 12.74% p.a.) 0% p.a. for 18 months $99 p.a. Go to site More info
ANZ Frequent Flyer Black
Earn 75,000 bonus Qantas Points after you spend $2,500 on eligible purchases within the first 3 months plus enjoy $0 annual fee for the first year. Plus, enjoy easy payments with Apple Pay.
19.99% p.a. $0 p.a. annual fee for the first year ($425 p.a. thereafter) Go to site More info
American Express Essential Credit Card
Receive a $50 credit on eligible spend and get Smartphone screen insurance combined with a no annual fee for life card. Also enjoy a 0% p.a. balance transfer rate for 12 months.
14.99% p.a. 0% p.a. for 12 months with 1% balance transfer fee $0 p.a. Go to site More info
ANZ Frequent Flyer Platinum
Get 50,000 bonus Qantas Points when you apply online, are approved and spend $2,500 on eligible purchases within the first 3 months. Enjoy a waived annual fee for the first year and earn up to 1.5 Qantas Points per dollar spent.
19.99% p.a. $0 p.a. annual fee for the first year ($295 p.a. thereafter) Go to site More info
Emirates Citi World MasterCard
Receive 40,000 bonus points and enjoy up to 10% off Emirates flights when you meet the spend requirement. Also pay a reduced annual fee for the first year.
20.99% p.a. 0% p.a. for 9 months $149 p.a. annual fee for the first year ($299 p.a. thereafter) Go to site More info
St.George Vertigo Visa
Introductory offer of 0% p.a. for 18 months on balance transfers and 1% p.a. for 12 months on purchases, plus a low annual fee.
1% p.a. for 12 months (reverts to 13.24% p.a.) 0% p.a. for 18 months $55 p.a. Go to site More info
Virgin Australia Velocity Flyer Card - Balance Transfer Offer
Enjoy a 0% p.a. balance transfer offer for 18 months and also earn 2 bonus Velocity Points in the first 3 months on everyday spend.
20.74% p.a. 0% p.a. for 18 months $64 p.a. annual fee for the first year ($129 p.a. thereafter) Go to site More info
HSBC Platinum Credit Card
Earn reward points with high credit limits, prestige services including a personal concierge service.
19.99% p.a. 0% p.a. for 15 months $149 p.a. Go to site More info
Virgin Australia Velocity Flyer Card - 0% Interest Offer
Receive 0% p.a. for 12 months on purchases, 0% p.a. for 6 months balance transfers and an exclusive $129 Virgin Australia Gift Voucher every year.
0% p.a. for 12 months (reverts to 20.74% p.a.) 0% p.a. for 6 months $129 p.a. Go to site More info
Citi Clear Platinum Card
A low rate platinum credit card with a low interest rate on purchases and balance transfers.
0% p.a. for 9 months (reverts to 14.99% p.a.) 0% p.a. for 9 months $99 p.a. Go to site More info
ANZ Rewards Platinum
Receive 50,000 bonus Reward Points after your first eligible purchase is made within 3 months of card approval and earn up 2 Reward Points for every dollar spent on purchases.
18.79% p.a. $95 p.a. Go to site More info
ANZ First Visa Credit Card
Enjoy 0% p.a. balance transfer rate for the first 18 months, a low annual fee, interest-free days on purchases and a low minimum credit limit.
19.74% p.a. 0% p.a. for 18 months with 3% balance transfer fee $30 p.a. Go to site More info
ANZ Rewards Credit Card
Get 25,000 bonus Reward Points after your first eligible purchase is made within 3 months of card approval and earn 1.5 points per dollar spent.
18.79% p.a. $80 p.a. Go to site More info
Bank of Melbourne Vertigo Visa Credit Card
Enjoy a low annual fee combined with 0% p.a. balance transfer offer for 18 months and 1% p.a. for up to 12 months on purchases.
1% p.a. for 12 months (reverts to 13.24% p.a.) 0% p.a. for 18 months $55 p.a. Go to site More info
HSBC Platinum Qantas Credit Card
Receive 60,000 bonus Qantas Points on eligible spend within 3 months. Enjoy access to premium benefits and complimentary insurance.
19.99% p.a. $199 p.a. Go to site More info
ANZ First Student Card
An ideal credit card for students with 44 days interest-free on purchases with $0 annual fee in the first year. Access your account on the go with the goMoney™ app.
19.74% p.a. $0 p.a. annual fee for the first year ($30 p.a. thereafter) Go to site More info
Bank of Melbourne Vertigo Platinum
A platinum card with a low balance transfer offer of 0% p.a. interest for 18 months and 1% p.a. for 12 months on purchases combined with complimentary insurance covers.
1% p.a. for 12 months (reverts to 12.74% p.a.) 0% p.a. for 18 months $99 p.a. Go to site More info
NAB Low Fee Card
Enjoy a low introductory rate of 0% p.a. on balance transfers and purchases for 15 months.
0% p.a. for 15 months (reverts to 19.74% p.a.) 0% p.a. for 15 months with a one off 3% balance transfer fee $30 p.a. Go to site More info
BankSA Vertigo Platinum
Enjoy 0% balance transfer rate for 18 months and 1% purchase rate for 12 months if you apply and are approved by 4 January 2017.
1% p.a. for 12 months (reverts to 12.74% p.a.) 0% p.a. for 18 months $99 p.a. Go to site More info
BankSA Vertigo Visa
A low interest rate card with a low annual fee, a long term balance transfer offer of 0% p.a. for 18 months and an introductory offer of 1% p.a. for 12 months on purchases.
1% p.a. for 12 months (reverts to 13.24% p.a.) 0% p.a. for 18 months $55 p.a. Go to site More info

Compare up to 44 day interest-free credit cards

Rates last updated December 10th, 2016
Purchase rate (p.a.) Balance transfer rate (p.a.) Annual fee
American Express Qantas Discovery Card
Save by not having to pay annual fees, and earn Qantas Frequent Flyer points at the rate of 1 per dollar spent.
20.74% p.a. 0% p.a. for 12 months with 1% balance transfer fee $0 p.a. Go to site More info
ANZ First Visa Credit Card
Enjoy 0% p.a. balance transfer rate for the first 18 months, a low annual fee, interest-free days on purchases and a low minimum credit limit.
19.74% p.a. 0% p.a. for 18 months with 3% balance transfer fee $30 p.a. Go to site More info
Virgin No Annual Fee Credit Card
No annual fee for the life of the card with $100 cashback and a 0% p.a. offer on balance transfers for 18 months. Spend criteria applies for cashback offer.
18.99% p.a. 0% p.a. for 18 months with 2% balance transfer fee $0 p.a. Go to site More info
Virgin Australia Velocity Flyer Card - 0% Interest Offer
Receive 0% p.a. for 12 months on purchases, 0% p.a. for 6 months balance transfers and an exclusive $129 Virgin Australia Gift Voucher every year.
0% p.a. for 12 months (reverts to 20.74% p.a.) 0% p.a. for 6 months $129 p.a. Go to site More info
Virgin Australia Velocity High Flyer Card - 30k Bonus Points offer
Receive 30,000 bonus Velocity Points and earn 1 Velocity Points per $1 spent. Receive an exclusive $129 Virgin Australia Gift Voucher and two complimentary Single Entry Virgin Australia domestic Lounge passes each year.
20.74% p.a. 1.9% p.a. for 15 months $144 p.a. annual fee for the first year ($289 p.a. thereafter) Go to site More info
Virgin Australia Velocity Flyer Card - Balance Transfer Offer
Enjoy a 0% p.a. balance transfer offer for 18 months and also earn 2 bonus Velocity Points in the first 3 months on everyday spend.
20.74% p.a. 0% p.a. for 18 months $64 p.a. annual fee for the first year ($129 p.a. thereafter) Go to site More info
NAB Low Fee Card
Enjoy a low introductory rate of 0% p.a. on balance transfers and purchases for 15 months.
0% p.a. for 15 months (reverts to 19.74% p.a.) 0% p.a. for 15 months with a one off 3% balance transfer fee $30 p.a. Go to site More info
American Express Qantas Ultimate Card
Enjoy up to 100,000 bonus Qantas Points on eligible spend, earn up to 3 Qantas Points for every $1 spent and get a free domestic return flight every year.
20.74% p.a. 0% p.a. for 12 months with 1% balance transfer fee $450 p.a. Go to site More info
American Express Velocity Platinum Card
Enjoy up to 50,000 bonus Velocity Points when you meet the minimum required spend and earn up to 3 rewards points per dollar spent. Also receive a complimentary return flight every year.
20.74% p.a. 0% p.a. for 12 months with 1% balance transfer fee $349 p.a. Go to site More info
American Express Qantas Premium Card
Earn as much as 30,000 bonus Qantas Points when you meet the minimum spend requirement. Enjoy frequent flyer benefits including uncapped Qantas Points per $1 spent, complimentary travel insurance and Qantas Club lounge invitations.
20.74% p.a. 0% p.a. for 12 months with 1% balance transfer fee $249 p.a. Go to site More info
ANZ First Student Card
An ideal credit card for students with 44 days interest-free on purchases with $0 annual fee in the first year. Access your account on the go with the goMoney™ app.
19.74% p.a. $0 p.a. annual fee for the first year ($30 p.a. thereafter) Go to site More info
NAB Qantas Rewards Premium Card - Exclusive Offer
Get 75,000 bonus Qantas Points plus enjoy a low promotional offer of 4.99% p.a. for 6 months on balance transfers.
19.99% p.a. 4.99% p.a. for 6 months $250 p.a. Go to site More info

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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