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How to make the most of your credit card's interest-free period

How to make the most of your credit card's interest-free period

Taking advantage of your card’s interest-free period can help you smooth your cash flow.

Most credit cards offer an interest-free period on purchases up to a certain number of days. This period is the maximum amount of time between you making a purchase and then being charged interest – as long as you don’t already owe money on your credit card.

Being able to buy now and then pay later is one of the biggest advantages of a credit card. So how can you make the most of the interest-free period?

What's interest?

Interest is the cost associated with borrowing money through your credit card account, and is expressed as an annual percentage rate. You can find out your interest rates and charges on your CommBank monthly statement. The purchase interest rate is the one most commonly advertised by lenders, and refers to the rate charged on purchases made with a credit card if an interest-free period doesn’t apply.

What's an interest-free period and how is it calculated?

An interest-free period is a period of time when no interest is charged on a new purchase, and may automatically apply when you open a new credit card account. It will continue to apply as long as you pay your closing balance in full by the due date each and every month.

Most credit cards offer an interest-free period of up to a certain amount of days. This number is the maximum number of days you won’t be charged interest, and depends on when you make your purchase within the statement cycle.

Read more about how credit card interest is calculated.

How it works

With CommBank, for example, each statement period runs for about 30 days and there is then 25 days from when your statement period finishes to the payment due date. This is why all CommBank credit cards offer an interest-free period of up to 55 days (apart from our Business Low Rate credit card). If you’re eligible for an interest-free period, the minimum number of interest-free days you’ll have is 25 days.

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In the above example, John’s interest-free period on purchases is up to 55 days.

1. 5 days after John’s statement period begun on May 1, John purchases some shoes for $100. He has 50 days interest-free on this purchase.

2. On May 25, John purchases a TV for $1,000. He has 30 days interest-free on this purchase.

3. On May 30, John’s statement period ends and he receives his statement. John now has 25 days to pay off his closing balance in full which is made up of his purchases during the period. In this case, his closing balance is $1,100.

4. June 24 is John’s payment due date. To avoid paying any interest on the purchases he’s made, John must pay his closing balance in full by the payment due date. If he doesn’t pay in full, he’ll lose his interest-free period on purchases and interest will be charged on his unpaid balance (including any purchases made since his last statement period ended) from after the payment due date.

John will receive a late payment fee if he doesn’t pay at least the minimum payment shown on his statement by the due date each month.*

What happens if you don’t repay your closing balance in full?

If you do not pay your closing balance in full or just make a minimum repayment, you will lose your interest-free period and interest will be charged on your unpaid balance from after the due date until you repay in full.

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How to avoid paying interest

If you have been paying interest on purchases, you can regain your interest-free period by:

  • Paying your account balance in full to get interest-free on all purchases from that day.2 Your account balance is made up of everything you owe up until today, including any purchases you’ve made since your last statement.3 
  • Paying your closing balance in full by the due date shown on your statement to get interest-free on new purchases in your next statement period. Your closing balance is the amount you owe from your last statement period. 

Remember, the sooner you pay off everything you owe, the less interest you’ll need to pay – you don’t need to wait until the due date.

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How to take advantage of the interest-free period

  • Pay your closing balance off in full each month
  • Set reminders to make sure you pay your balance in time or use AutoPay
  • Try to plan your spending so you make any bigger purchases at the start of the statement period to give yourself more time to repay.

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1 Illustrative purposes only. Example assumes that only purchases were made and there weren't any cash advances, balance transfers or Great Rate transactions and that the previous statement balance was paid in full by the due date. 2 Please note: sometimes we don’t receive payments in time to process them the same day as you make them, for instance when you transfer from another bank, which may affect this. 3 Your account balance does not include any pending transactions. This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. *The example above is for illustrative purposes only. The example assumes that you have previously paid your closing balance in full each month and are eligible for an interest-free period on purchases. The example also assumes only purchases have been made and no balance transfers, instalment plans or cash advance transactions apply. # The example is for illustrative purposes only and assumes you’ve paid your closing balance in full by the due date in your previous statement period to be eligible for an interest-free period on purchases. ^The example is for illustrative purposes only and assumes you have not paid your closing balance in full by the due date in your previous statement period. ~The example is for illustrative purposes only and assumes you’ve paid your closing balance in full by the due date in previous statement periods to be eligible for an interest-free period on purchases, and you can continue to do so to maintain your interest-free period.