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How a credit card interest-free period works
Most credit cards in Australia offer interest-free days on purchases. Here's what you need to know to make use of them and save on credit card interest.
Interest-free days are a common credit card feature that gives you a way to make purchases without being charged interest for a set number of days in each statement period. They begin on the first day of your statement period and end on the payment due date.
For example, with a credit card that offers up to 55 days interest-free, you would get the maximum 55 days for purchases made on day 1 of your statement period. And a purchase made on day 30 would give you 25 days to pay it off before interest is charged.
Take note: 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.
How do interest-free days work?
This visual example of interest-free days highlights the interest-free period (in green), when purchases are made, when the statement is issued and what happens if you pay less than the full amount for a billing cycle.
Example: How to use the interest-free period on a credit card
Say you had a credit card that offers up to 55 interest-free days, with a statement period that starts on the 1st of each month and ends on the 30th. If you were making purchases in June, here's how the time period would look:
1st June. First day of the statement.
30th June. Last day of the statement.
25th July. Payment due date for this statement period.
In this case, the 55 interest-free days begin on 1st June and end on the 25th of July. So, here's an example of how this credit card's interest-free period would work for your monthly purchases:
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 statement period, which means you get 35 days interest-free before a payment is due on 25th July.
You make a $150 purchase on 30th June. This is the last day of your statement period but the purchase won't attract any interest until 25th July, giving you an interest-free period of 25 days.
In this example, you would have a credit card balance of $450 from new purchases on your June statement. If you paid the total amount owed by the 25th July, you wouldn't be charged interest on your purchases. You'd also get interest-free days for the next statement period.
Statement period or billing cycle. The statement period shows activity on your credit card account and usually runs for 30 days, or from when your last statement was issued to when the next one is issued.
Payment due date. This date is listed on your statement and tells you when you need to pay at least the minimum amount. If you want to get interest-free days, you'll usually have to pay the total balance by the due date.
Closing balance or payment closing balance. 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. A "closing balance" is usually the total of what's owed on your account, while a "payment closing balance" might be different if you have a promotional rate or offer for part of your balance.
Minimum monthly payments. This is the minimum you need to pay by the due date on your statement to avoid late fees and a late payment listing on your credit report. You usually can't get interest-free days for purchases if you only pay this amount.
Purchase rate. The interest rate charged on purchases. Interest-free days help you avoid this cost.
Take note: Interest-free days only apply to new purchases, including groceries and retail shopping, petrol, travel bookings and even medical appointments. Transactions that don't typically qualify for this interest-free period include cash advances, balance transfers and BPAY payments.
Is a credit card with interest-free days worth it?
Most credit cards in Australia offer interest-free days on purchases, so it may not be the main feature you look at when comparing cards. But 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 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 want to consider low interest rate credit cards and 0% purchase offer credit cards.
Finder survey: How long have Australians had their current interest-free credit card?
Response
5+ yrs
37.5%
2 yrs
27.94%
1 year
13.24%
3 yrs
13.24%
Less than 1 year
4.41%
4 yrs
3.68%
Source: Finder survey by Pure Profile of 1113 Australians, December 2023
Frequently asked questions
What is the maximum number of interest-free days I can get?
The humm90 Mastercard offers up to 110 days interest-free on all purchases (excludes cash advances). This is the highest number of interest-free days currently available on a credit card in Australia according to the Finder database.
In comparison, most other credit cards offer between 44 and 55 days interest-free, with a few also offering up to 62 days interest-free. These are also other cards that offer 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.
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 also need to pay the full balance for the previous statement, as well as the statement issued at the end of that period.
Amy Bradney-George was the senior writer for credit cards at Finder, and editorial lead for Finder Green. She has over 16 years of editorial experience and has been featured in publications including ABC News, Money Magazine and The Sydney Morning Herald. See full bio
Amy's expertise
Amy has written 579 Finder guides across topics including:
For those that are confused, Yes any purchases in May (Say the 1st of May) would be part of the next statement, and would have 55 interest free days until 25 June… BUT ONLY IF YOU PAID YOUR BALANCE IN FULL FIRST. If you paid the card off to $0.00 on 1 May then your purchase would be interest free until 25 June, if your balance was still outstanding, then even a purchase on 24 May would only have 1 day interest free.
So basically to reset your interest only days and not pay interest:
Pay off the balance of the card before the due date
AND
1.Pay it off on the 1st day (in the example 1 May) of the statement will give you 55 days interest free (in the example up to 25 June)
OR
2. Pay it off on the due date(in the example 25 May) will give you 30 days interest free for purchases before the statement start date (in the example 1 June)
OR
3. If you pay it off on the due date (in the example 25 May) do not use it until the start of the next statement period (in the example 1 June) The you would not have to pay it off until the following months due date (25 July).
Your interest only days ONLY reset after the balance has reached $0.00 so if you had $450 of costs in April, PAID OFF $350 1 May, then SPENT $200 on 24 May, and PAID OFF the $100 left over from the $450 on 25 May, on 26 May you would immediately start paying interest on the outstanding $200 because you never reduced the balance to $0.00.
My suggestion is to have 2 cards, preferably ones that don’t have an annual fee, then simply alternate the cards each month so you can have the full interest free days.
Eg:
Jan:Use card 1
Feb: Use Card 2, Pay off Card 1
Mar: Use Card 1, Pay off Card 2
Apr: Use Card 2, Pay off Card 1
May: Use Card 1, Pay off Card 2
Jun: Use Card 2, Pay off Card 1
etc…
As long as you can pay off the cards, you don’t have a problem, however if having 2 cards just means you will spend more, I would advise against it.
ErinMarch 27, 2012
Hi I need help in understanding what may be the best route for me, I owe $8500 on a credit card( which i would like to cancel as soon possible), and need to know which bank may best suit me, I have searched your sight and have been given advice to look into a Balance Transfer, is this a better option than a Personal loan in the long run, I believe that I can afford to pay at least $500 plus each fortnight,
Thank you
Regards
Finder
JacobApril 8, 2013Finder
Hi Erin,
Thanks for your question.
There are a number of lenders that can assist you with consolidating your debts. If you are transferring multiple debts from more than one credit card, you need to make sure that the combined debt does not exceed your balance transfer limit.
Before applying, please ensure that you meet all the eligibility criteria and read through the details of the needed requirements as well as the relevant Product Disclosure Statements/Terms and Conditions when comparing your options before making a decision on whether it is right for you.
I hope this helps.
Cheers,
Jacob
BananaSeptember 25, 2010
I thought I understand, but then
you wrote
“if your statement and balance was due on the 25th of the current month, and you made a purchase on the 12th, you only have 13 interest free days.”
Wouldn’t a purchase on the 12th be part of the next months balance. Wouldn’t it have to be paid by the 25th on the *next* month?
masafiFebruary 22, 2010
everything ok i understood but what if i made the first purchase on april 15 , when my interest will start?
MargaretJanuary 8, 2010
Thank you to the person who wrote and published this information. It was extremely helpful. You have explained it clearly and I now understand why I was charged interest on my credit card despite assuming I had paid off the balance before interest is charged.
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For those that are confused, Yes any purchases in May (Say the 1st of May) would be part of the next statement, and would have 55 interest free days until 25 June… BUT ONLY IF YOU PAID YOUR BALANCE IN FULL FIRST. If you paid the card off to $0.00 on 1 May then your purchase would be interest free until 25 June, if your balance was still outstanding, then even a purchase on 24 May would only have 1 day interest free.
So basically to reset your interest only days and not pay interest:
Pay off the balance of the card before the due date
AND
1.Pay it off on the 1st day (in the example 1 May) of the statement will give you 55 days interest free (in the example up to 25 June)
OR
2. Pay it off on the due date(in the example 25 May) will give you 30 days interest free for purchases before the statement start date (in the example 1 June)
OR
3. If you pay it off on the due date (in the example 25 May) do not use it until the start of the next statement period (in the example 1 June) The you would not have to pay it off until the following months due date (25 July).
Your interest only days ONLY reset after the balance has reached $0.00 so if you had $450 of costs in April, PAID OFF $350 1 May, then SPENT $200 on 24 May, and PAID OFF the $100 left over from the $450 on 25 May, on 26 May you would immediately start paying interest on the outstanding $200 because you never reduced the balance to $0.00.
My suggestion is to have 2 cards, preferably ones that don’t have an annual fee, then simply alternate the cards each month so you can have the full interest free days.
Eg:
Jan:Use card 1
Feb: Use Card 2, Pay off Card 1
Mar: Use Card 1, Pay off Card 2
Apr: Use Card 2, Pay off Card 1
May: Use Card 1, Pay off Card 2
Jun: Use Card 2, Pay off Card 1
etc…
As long as you can pay off the cards, you don’t have a problem, however if having 2 cards just means you will spend more, I would advise against it.
Hi I need help in understanding what may be the best route for me, I owe $8500 on a credit card( which i would like to cancel as soon possible), and need to know which bank may best suit me, I have searched your sight and have been given advice to look into a Balance Transfer, is this a better option than a Personal loan in the long run, I believe that I can afford to pay at least $500 plus each fortnight,
Thank you
Regards
Hi Erin,
Thanks for your question.
There are a number of lenders that can assist you with consolidating your debts. If you are transferring multiple debts from more than one credit card, you need to make sure that the combined debt does not exceed your balance transfer limit.
You can also consider consolidating your credit card debt to a personal loan and also see if you can take advantage of other debt consolidation methods available.
Before applying, please ensure that you meet all the eligibility criteria and read through the details of the needed requirements as well as the relevant Product Disclosure Statements/Terms and Conditions when comparing your options before making a decision on whether it is right for you.
I hope this helps.
Cheers,
Jacob
I thought I understand, but then
you wrote
“if your statement and balance was due on the 25th of the current month, and you made a purchase on the 12th, you only have 13 interest free days.”
Wouldn’t a purchase on the 12th be part of the next months balance. Wouldn’t it have to be paid by the 25th on the *next* month?
everything ok i understood but what if i made the first purchase on april 15 , when my interest will start?
Thank you to the person who wrote and published this information. It was extremely helpful. You have explained it clearly and I now understand why I was charged interest on my credit card despite assuming I had paid off the balance before interest is charged.