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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 is interest?

Interest is the cost associated with borrowing money through your credit card account, and is expressed as an annual percentage rate. 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 is an interest-free period and how is it calculated?

An interest-free period is a period of time in which 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 so 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 figure is the maximum number of days you won’t be charged interest, and depends on when you make your purchase within the statement cycle.

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.

Note: this example assumes you’ve been paying your closing balance in full by the due date each month.1

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

If you do not pay your closing balance in full, 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. 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 This is 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. This 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. 

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

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.