What happens when you pay your credit card balance in full?

You can say goodbye to paying interest on your credit card, avoid more debt and even improve your credit score when you pay your balance in full each month.

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When you get your credit card statement, you will see the account's closing balance, the date that a payment is due and the minimum amount you need to pay by that date (among other details). The closing balance on your credit card statement is the total amount owed, or what's left for you to pay off based on all the transactions and payments you have made during that statement period.

If you can afford to pay off your card's closing balance in full by the due date on your statement, you will save on interest charges – especially if you have a card that offers interest-free days on purchases. Plus, paying off your credit card could help improve your credit score by adding positive details to your payment history. Let's take a closer look at how it works in this guide.

How does paying my card's closing balance help me save on interest?

Credit card interest is typically calculated daily, based on your balance at the end of that day, and then charged to your account each month (at the end of your statement period). This means any payment you make will reduce your balance and the amount of interest that accrues on it. And when you pay your card's closing balance in full by the due date on your statement, none of those transactions will be carried over to the new statement period. You could think of it as a way of wiping the slate clean each month.

Paying off your entire credit card balance also gives you a way to avoid interest charges completely if you have a card that offers interest-free days on purchases (and plenty do). With interest-free days, the purchases you make between the start and end of your statement period will not be charged interest, as long as you pay off your full balance by the due date on your statement. If you want to learn more about how interest-free days work, this Finder guide breaks it down in detail.

How can paying my credit card's balance help my credit score?

Your credit score is based on the details listed on your credit file, including your repayment history for credit cards, loans and other credit products. Paying off your credit card (and other accounts) on time helps build up good credit history, which can also help you improve your credit score.

On the flipside, if you have late payments or defaults on your credit history, it will have a negative impact on your credit score. One important detail to be aware of with your credit card is that you only need to pay the minimum amount by the due date on your statement to meet the repayment requirements. But if you can pay more, you should do that to help reduce or avoid interest charges.

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What's the difference between paying the minimum and the full balance on my card?

The minimum repayment is what you must pay back each month and it is usually 2-3% of the total account balance. Paying this will help you avoid late payment fees and bad credit history. But if you only pay the minimum amount, you will be charged interest on the balance of your account. To avoid interest, you can pay the full amount owing, which is based on how many purchases you have made on the card during the statement cycle.

As an example, let’s say you spent $2,000 on a credit card with a minimum payment of 3%. The minimum you would have to pay off your statement by the due date would be $60. But the remaining $1,940 would attract interest until you paid it all off. So if you wanted to avoid interest charges, you would have to pay off the full $2,000 by the due date on the statement. It is recommended that you pay as much of your outstanding balance as you can each month. It can take years to clear your balance by only paying the minimum amount and in some cases you may never be able to pay off your card.

Tips to help you pay your credit card balance in full

  • Set up an autopay. An automated payment from your transaction account to your credit card allows you to pay the minimum amount due, a partial amount or the whole balance every month. To set up this payment option, complete and return an automatic payment plan form to your credit card provider, including details of your chosen transaction account and the amount you want to be paid off each month. You can also set up autopay by calling your financial institution.
  • Change your statement date. Some credit card providers let you change the date that your statements are issued so that they line up with when you’re paid. For example, if you’re paid monthly on the first of the month, you could request to have your statement due date fall then or a week later so that you will have funds ready to pay it off. Call your credit card provider to discuss and set up this option.
  • Set calendar reminders. Set up reminders using your phone or computer so you never miss a payment due date. A calendar on the fridge can be a good reminder too.
  • Request a lower credit limit. This will help limit how much you spend on your credit card. Choosing a limit that you can afford to pay off each month also means you can make the most of interest-free days for your purchases.
  • Create a budget. If you want to be more hands-on, you can create a budget to find out where you can cut back on expenses in order to pay your card balance in full each month. A budget lets you see how much you have coming in and how much is going out, as well as where it all goes.
  • Set up a dedicated account. Open a transaction or savings account just for the money you plan to use on credit card repayments. A savings account will cost you nothing and you can get rewarded with bonus interest when you make regular deposits. Want to take it to the next level? If you have a mortgage with an offset account, here's how you could use it in combination with a credit card to save interest on your mortgage and your credit card.

As a general guide, if you can afford to pay your credit card balance in full each month, then it will save you money and give you the option of making interest-free purchases. But if it's not possible to pay off the entire balance, choose an amount that is affordable – even if it's only the minimum amount required. Then aim to clear the rest when you can afford to do so.

Comparison of 55 days interest-free credit cards

Data indicated here is updated regularly
Name Product Purchase rate Interest-free period Annual fee Balance transfer rate
Westpac Low Rate Card
13.74% p.a.
Up to 55 days on purchases
$59
0% p.a. for 24 months with 1% balance transfer fee
A low rate card offering 0% p.a. interest on balance transfers for the first 24 months and a $200 cashback offer.
Citi Rewards Card
21.49% p.a.
Up to 55 days on purchases
$49 annual fee for the first year ($149 p.a. thereafter)
0% p.a. for 30 months
Save on interest with 0% p.a. on balance transfers for 30 months with no balance transfer fee. Plus, a $49 first-year annual fee.
HSBC Platinum Credit Card - Balance Transfer Offer
19.99% p.a.
Up to 55 days on purchases
$0 annual fee for the first year ($129 p.a. thereafter)
0% p.a. for 26 months with 1% balance transfer fee
Enjoy a 26-month balance transfer offer, a first-year annual fee waiver and complimentary travel insurance.
Bankwest Breeze Classic Mastercard
10.99% p.a.
Up to 55 days on purchases
$0 annual fee for the first year ($49 p.a. thereafter)
0% p.a. for 26 months with 2% balance transfer fee
Save with 0% p.a. on balance transfers for 26 months (with a 2% BT fee) and $0 first-year annual fee. Plus, a 10.99% p.a. purchase interest rate.
Qantas Premier Platinum
19.99% p.a.
Up to 55 days on purchases
$199 annual fee for the first year ($299 p.a. thereafter)
0% p.a. for 18 months with 1% balance transfer fee
Get 100,000 bonus Qantas Points, 75 bonus Status Credits and a 0% p.a. balance transfer rate for 18 months (with a one-time 1% BT fee).
Bendigo Bank Low Rate Credit Card
0% p.a. for 15 months, reverts to 11.99% p.a.
Up to 55 days on purchases
$45
13.99% p.a.
Get 0% p.a. on purchases for 15 months and a $150 Woolworths Supermarket gift card when you spend $1,000 in the first 90 days. Ends 31 Jan 2021.
Coles Low Rate Mastercard
12.99% p.a.
Up to 55 days on purchases
$58
0% p.a. for 6 months
Enjoy $100 off a Coles Supermarket shop and a 0% balance transfer for 6 months. Plus, earn Flybuys points as you spend. Ends 31 January 2021.
Citi Clear Card
0.9% p.a. for 15 months, reverts to 14.99% p.a.
Up to 55 days on purchases
$99
0.9% p.a. for 15 months
Save with 0.9% p.a. for 15 months on purchases and balance transfers. Plus, complimentary purchase insurance cover.
Citi Simplicity Card
0% p.a. for 6 months, reverts to 21.49% p.a.
Up to 55 days on purchases
$0
0% p.a. for 6 months
Get 0% p.a. interest for up to 6 months on purchases and balance transfers. Plus, a $0 annual fee for life.
St.George Vertigo Classic
13.99% p.a.
Up to 55 days on purchases
$0 annual fee for the first year ($55 p.a. thereafter)
0% p.a. for 24 months
Get 0% p.a. promotional balance transfer rate, with no balance transfer fee. Plus, save with a first-year annual fee waiver.
St.George Vertigo Platinum
0% p.a. for 15 months, reverts to 12.99% p.a.
Up to 55 days on purchases
$49 annual fee for the first year ($99 p.a. thereafter)
6.99% p.a. for 12 months
Features an introductory 0% p.a. purchase rate, $49 first year annual fee and complimentary travel insurance covers. Ends 9 Feb 2021.
American Express Platinum Edge Credit Card
20.74% p.a.
Up to 55 days on purchases
$195
Receive $200 Travel Credit each year and earn up to 3 Membership Rewards Points per $1 spent.
ANZ Low Rate
12.49% p.a.
Up to 55 days on purchases
$0 annual fee for the first year ($58 p.a. thereafter)
0% p.a. for 25 months with 1.5% balance transfer fee
Save with 0% p.a. on balance transfers for 25 months (with a 1.5% BT fee) and $0 first-year annual fee. Plus a 12.49% p.a. purchase interest rate.
Bank of Melbourne Vertigo Classic
13.99% p.a.
Up to 55 days on purchases
$0 annual fee for the first year ($55 p.a. thereafter)
0% p.a. for 24 months
Save with a 0% p.a. interest for 24 months on balance transfers, with no balance transfer fee. Plus, a $0 first-year annual fee.
St.George Amplify Platinum
0% p.a. for 7 months, reverts to 19.74% p.a.
Up to 55 days on purchases
$0 annual fee for the first year ($99 p.a. thereafter)
0% p.a. for 22 months with 1.5% balance transfer fee
Save with 0% p.a. interest rates on purchases and balance transfers. Plus a $0 first-year annual fee. Ends 09 February 2021.
American Express Velocity Escape Card
20.74% p.a.
Up to 55 days on purchases
$0
Earn 0.75 Velocity Points on your everyday purchases, uncapped, and pay $0 annual fee for the life of the card with this no-frills frequent flyer card.
NAB Low Rate Credit Card
12.99% p.a.
Up to 55 days on purchases
$59
0% p.a. for 20 months with 2% balance transfer fee
Get a 0% p.a. interest rate for 20 months on balance transfers, Visa Offers + Perks and a competitive $59 ongoing annual fee.
American Express Velocity Platinum Card
20.74% p.a.
Up to 55 days on purchases
$375
Get 50,000 bonus Velocity Points when you spend $3,000 for the first 3 months. Plus, 100 Status Credits and luxury travel perks.
Bank of Melbourne Amplify Signature
19.74% p.a.
Up to 55 days on purchases
$139 annual fee for the first year ($279 p.a. thereafter)
0% p.a. for 6 months
Up to 200,000 bonus points (130k in the first year & 70k in the second year) when you spend $12k/year for the first 2 years. Ends 9 Feb 2021.
BankSA Vertigo
13.99% p.a.
Up to 55 days on purchases
$0 annual fee for the first year ($55 p.a. thereafter)
0% p.a. for 24 months
Enjoy a 0% p.a. for 24 months on balance transfers, with no balance transfer fee. Plus, $0 first-year annual fee.
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