Most credit cards offer "up to" a set number of interest-free days for new purchases, which gives you a period of time when you can use your card without being charged interest. Usually, you need to pay your credit card balance in full by the due date on your statement to make use of this interest-free period.
If you don't want to pay interest on your credit card, interest-free days are a valuable feature. So, let's take a closer look at how it actually works.
What does "interest-free days" mean?
Interest-free days give you a period of time when you can make purchases without being charged interest during your credit card billing cycle. They begin on the first day of your statement period and end on the payment due date.
For example, if you made a purchase on day 1 of a statement period, you could have 55 days to pay it off before interest is applied to the balance. A purchase made on day 2 of that statement period would get 54 days interest-free, and a purchase made on day 30 would give you 25 days to pay it off before interest is charged.
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Other key definitions
When you're reading about interest-free days, you'll come across a number of other terms that relate to this feature. Here are the key ones to take note of:
- Statement period/billing cycle. This is the time when you can make purchases and avoid interest with interest-free days. The statement period usually runs for 30 days, or from when your last statement was issued to when the next one is issued.
- Statement issue date. This is the date on which the bank issues your monthly credit card statement.
- Payment due date. The date by which you must pay the balance to avoid late charges/fees. If you want to get interest-free days, you'll usually have to pay your full balance by this date.
- Closing balance/payment closing balance. This is the total you need to pay by the due date on your statement if you want to get interest-free days for the next statement period. The "closing balance" is usually the total of what's owed on your account, while the "payment closing balance" might be different if you have a promotional rate or offer for part of your balance.
- Purchase rate. The interest rate charged on purchases. Interest-free days help you avoid this cost.
Answers to the most common questions about interest-free days
How do I get interest-free days?
You usually need to repay the full closing balance that's listed on your statement by the due date to get interest-free days. In most cases, you'll also need to pay the full balance for the statement that you got before the start of that billing cycle, as well as the statement issued at the end of it.
Why does it always say "up to 55 days"?
The term "up to" refers to the maximum number of interest-days you can get with your credit card. This is because the actual number of interest-free days depends on what day of your billing cycle you make a purchase.
So, on a card with "up to 55 days interest-free", if you made a purchase on the first day of your statement period, you'd get 55 days interest-free for it. And if you made a purchase on day 30 of that statement period, you'd get 25 days interest-free.
Can I make interest-free purchases with a balance transfer credit card?
Sometimes, but it depends on the card. Some credit cards only offer interest-free days for purchases when you pay the account's entire closing balance, including any balance transfer debt. Other credit cards let you make interest-free purchases when you have a balance transfer, as long as you pay the entire purchase balance for your statement – and may even list that balance on your statement.
For example, NAB has an "interest-free days payment" amount that you can pay to still get interest-free days while you carry a balance transfer debt, while Westpac has a "Monthly Payment Balance" that shows the amount you need to pay to get interest-free days on purchases.
When you're looking at different cards, check the details for the balance transfer and/or interest-free days to see if you'll be able to get an interest-free period for new purchases.
Do interest-free days cover all credit card spending?
No. Interest-free days only apply to new purchases on your card. This usually covers all your everyday spending – including groceries and other retail shopping, petrol, dining out and even medical appointments.
But transactions that don't usually get interest-free days include cash advance transactions, gambling, balance transfers, BPAY payments and some bill payments.
When is a credit card with interest-free days worth it?
Most credit cards in Australia offer interest-free days on purchases. So, if you pay off your credit card balance in full by the due date each month, a card with interest-free days means you can make purchases without paying interest. This could be ideal if you use a credit card to earn rewards or for short-term cash flow such as spending between monthly paydays.
You could also use it as an alternative to other buy now, pay later services. But if you think you might not be able to pay the account's closing balance in full each month, you may like to consider low interest rate credit cards and 0% purchase offer credit cards.
Compare 55 days interest-free credit cards
Other key details for interest-free days
- Minimum monthly payments. You usually can't get interest-free days for purchases if you only pay the minimum amount required on your statement, as most credit cards only offer this benefit when you pay your balance in full by the due date.
- Statement dates. Don’t expect all your credit cards to have similar billing cycle dates and dues dates. These dates can vary even if you have two cards from the same card issuer.
- Instalment plans. If you set up an instalment plan for part of your credit card balance, you will usually have to pay the required instalment repayment, as well as the rest of your monthly account balance, to remain eligible for interest-free days. These details are shown on your credit card statement, as well as your provider's website. If you're unsure, contact your provider to check whether you can still get interest-free days when you have an instalment plan.
Example: Making use of interest-free days
Let’s assume you have a credit card that offers 55 interest-free days and its billing cycle begins on the 1st 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:
- 1st June. First day of the statement
- 30th June. Last day of the statement
- 25th July. Due date of your payment for June
In this case, the 55 interest-free days begin on 1st June and end on the 25th of 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 $200 purchase on 1st June. You don’t have to pay any interest towards this purchase until 25th July, which gives you 55 interest-free days.
- You make a $100 purchase on 20th June. This is the 20th day of your billing cycle, so you don’t have to pay any interest towards the purchase until 25th July. This means you get 35 interest-free days.
- You make a $150 purchase on 30th June. This is the last day of your billing cycle but the purchase won't attract any interest until 25th July, giving you an interest-free period of 25 days.
When your statement is issued for June, you'll owe $450. So as long as you pay this in full by the 25th July, you won't be charged interest on your purchases and can continue to enjoy interest-free days for the next billing cycle.
Diagram: How do interest-free days work?
Interest-free days can be tricky to visualise, so you can see this handy diagram to understand how it works. As well as showing the interest-free period (in green), we also show when purchases are made, when the statement is issued and what happens if you pay less than the full amount for a billing cycle (the middle one in this case).
Credit cards that come with 55 interest-free days give you the ability to make purchases and not pay any interest towards them as long as you make timely repayments. Such cards can come with a number of other features as well, so it’s important that you choose a card as per your requirement. Bear in mind that just about every credit card issuer provides cards with interest-free days on purchases, so it is in your most interest to compare as many as possible before making a decision.
More questions about credit card interest-free periods
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What is the maximum number of interest-free days I can get?
With Australian credit cards that offer interest-free days, the maximum interest-free days you can take advantage of usually vary in between 44 and 55, depending on the card you use. In the past, some cards have offered up to 62 days interest-free and others have extended interest-free finance options with specific retail partners.
Do additional cards also get interest-free days?
Additional cards linked to your primary card follow the same billing cycle as the primary card and offer just as many interest-free days on purchases.
I can’t pay my account’s closing balance in full this month, but I can in the future. Will I ever get interest-free days again?
Usually, when you carry a balance over to your next statement period, you won't be eligible for interest-free days for that statement period. To get the interest-free period back, you'll need to pay the total amount listed on your next 1-2 statements by the due date. This does vary by card, so check the details for your account or ask your credit card provider what you need to do to get interest-free days again.