How does the interest-free period on your credit card work?

Updated: Jul 16, 2020

Article - Maya Fisher French

There is a great deal of confusion over how the interest-free period works on your credit card. While credit cards advertise 55 days interest free, that is the maximum interest-free period you can get, and it all depends on how you use your card. About 85% of card holders get zero days interest free.

The first thing you should know is that if you don’t pay your card in full on due date, interest is charged from the date of purchase. You effectively lose the benefit of that interest-free period. Considering that only 15% of South Africans pay their credit cards in full each month, most never even benefit from the interest saving.

You also need to keep in mind the dates of your credit card billing cycle. You’ll only get the full 55 interest-free days on purchases made the day after your billing cycle closes.

An example

1 – 31 March is your card’s billing period. Any amounts spent during this period are free of interest if you pay the full amount owing (purchases between these dates) by 24 April.

In other words, if you make a purchase on 1 March you effectively have until 24 April to pay for it – 55 days witout any interest being charged. But if you make the purchase on 31 March, you only get 24 days interest free. If you have a credit card charge on 1 April this will fall into the next billing cycle payable on 24 May.

So, if you want to make a big purchase and benefit from the full interest-free period, make sure you understand your billing cut-off date. You want to make the purchase on the first day of the new cycle. Also make sure you pay it off in full on payment date – otherwise you pay interest right back to day one.

Some transactions immediately incur interest

The following transactions do not qualify for any interest-free period and incur charges from day one:

  1. Cash withdrawals from your credit card

  2. Gambling charges

  3. Transferring amounts from your credit card to another credit card or bank account.

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