Got an interest-free period on your credit card? Use it wisely

If you make use of the interest-free period on your personal credit card and pay your full Closing Balance (or if applicable, your ‘Adjusted Closing Balance’) by the Due Date on your statement each month, you could avoid paying interest on your purchases^disclaimer.

If your credit card – or the card that you’re thinking about applying for – comes with an interest-free period on purchases^disclaimer, then it’s in your best interest (pardon the pun) to learn how this feature works.

What’s an interest-free period?

Think of the interest-free period on purchases on a personal credit card as a potential buffer. When it applies, it’s a period of time in which you won’t be charged interest on new eligible purchases^disclaimer. This period can run from the beginning of a statement period to the payment Due Date on a credit card.

But remember. Not all purchases get the full amount of interest-free days and some transactions may not get any at all (for example, at ANZ, cash advances). You may also have to satisfy certain conditions to get the benefit of an interest-free period on purchases (more on that below).

Check your credit contract to learn whether an interest-free period applies to your Credit Card Account and when and how it applies.

How long have you got?

The interest-free period on purchases can vary depending on the provider and the credit card. Not all cards have one. If you do have an interest-free period on purchases, it could be up to 44 days, up to 55 days, or something else^disclaimer. If you’re not sure, check your credit card contract or ask your provider.

A tripping point for some people is the “up to” bit. Typically, the interest-free period that is offered on purchases is “up to” a certain number of days. At ANZ, for example, if you have “up to 55” interest-free days, this doesn’t mean you have 55 days interest-free after every single purchase. Rather, because an interest-free period runs from the beginning of a statement cycle until the payment Due Date, the number of interest-free days will depend on when you make that purchase within your statement cycle (and the type of purchase).

For example, at ANZ if an account holder currently has up to 55 interest-free days on purchases and if their credit card statement period is from June 1st to 30th, the account holder's repayment will be due on July 25th. This is 55 days after the first day of that statement^disclaimer.

If someone had a zero balance at the beginning of the statement cycle, and if they bought milk with that card on June 1st that person could have 55 interest-free days on that purchase if they pay off their current statement balance in full by July 25th (the Due Date). Let’s say the account holder buys the milk on June 20th. In this scenario, the account holder would have a maximum of 35 days interest-free on the purchase (provided they had a zero balance at the beginning of the statement cycle and paid off their current statement balance in full by the Due Date of that statement cycle)^disclaimer.

Remember, it’s “up to” 55 days, not 55 days for every purchase.

Missed a payment or haven’t paid in full? You could lose your interest-free period if you have one

At ANZ, if you have an interest-free period on purchases and if you don’t pay the full Closing Balance (or if applicable, your 'Adjusted Closing Balance') shown on your statement by the Due Date each month^disclaimer, the interest-free period will not apply and the outstanding purchases balance on your account will attract interest^disclaimer.

Say someone ordinarily pays the balance of their ANZ personal credit card in full each month and at the start of their statement cycle had a $0 balance. This month, that person owes $2,500 but can only pay $2,000 towards their balance by the payment Due Date. This means that the $500 balance owing will generally attract interest from the day after the payment Due Date^disclaimer. It also means that this person will lose the benefit of the interest-free period on purchases for at least the next statement period, meaning that from the next statement period they will accrue interest on new purchases from the day they make them^disclaimer.

To regain the benefit of an interest-free period on purchases, that person will either need to ensure the Closing Balance (or if applicable, your 'Adjusted Closing Balance') at the end of a statement cycle is zero, or pay the full closing balance (or if applicable, your 'Adjusted Closing Balance') shown on a subsequent statement by the relevant Due Date.

You may also have to satisfy other conditions to get the benefit of an interest-free period on purchases. So remember to check the credit contract that applies to the relevant account for details.