Do you get charged interest on your credit cards each month? Have you given up trying to understand the interest-free credit card periods? You shouldn't. Understanding your credit card's interest-free periods, statement and payment dates could save you thousands in interest fees.
Understanding important credit card dates and your spending habits will save you money so let's break it down so you can finally put an end to costly credit card interest fees.
What are interest-free periods?
The interest-free period is the time that credit card providers allocate when they will not charge you interest on your purchases. Once the interest-free period ends, your financial institution will automatically start charging you interest on the balance of your credit card.
The most popular amount of interest-free days is usually 55. During this time it is wise to make the most of it and pay the outstanding balance of your credit cards to avoid being charged interest.
Do you know your credit card statement period?
If not, you could be incurring interest every month by missing the interest-free period because you are paying outside of your statement periods.
Statement periods vary each month but they all go for 30 days. The 'statement begins' and 'statement ends' dates on your statement will tell you the statement period and once this period has collapsed you usually have an extra 25 days to pay off the full balance before incurring interest. However, not all banks offer the same interest-free periods so make sure you know your banks or financial institutions interest-free periods.
The number of interest-free days also differ depending on the day you make a purchase and when your statement period ends. Be aware that if you purchase an item towards the end of your statement period, you will have less time to pay off the full amount before interest rates apply.
How can I avoid paying credit card interest?
Pay your outstanding balance in full before the payment due date each month.
If you only pay the minimum repayment instead of the full outstanding balance, by the payment date, you will lose your interest-free period. From this point on, interest will be lumped on the remaining balance and all future purchases.
How can I get my interest-free period back?
Paying the full outstanding closing balance will put you back into the land of interest-free spending. If you want to stay there make sure you pay off your credit card debt by the payment date each month.
Tips to help you get back on the interest-free track
- Set up direct debit so you don't forget to make payments.
- Set up email or SMS reminders
- Consider using your savings to pay off your credit card. This could save you money as you are paying less interest.
- Keep a constant eye on your transactions and avoid buying purchases on a whim.
If your current credit card isn't working for you then perhaps you could consider a balance transfer onto another credit card with lower interest rates. To compare some of Australia’s best credit cards use the RateCity credit card comparison tool.