Credit card interest is charged daily, based on the amount of debt you owe. The amount of interest you may be charged depends on a range of factors, including:
- Credit card type - Visa, Mastercard or American Express can carry varying interest rates and fees.
- Credit card purpose - Platinum cards, rewards credit cards, frequent flyer credit cards and travel credit cards may come with higher interest rates. This is because ongoing costs like this, and annual fees, help to pay for rewards programs, sign-up bonus points, complimentary insurances, like travel insurance, concierge services and more.
However, if you pay off your debt in full every month, and do not withdraw cash with your card, you will not be charged interest. This is fundamentally the best way to avoid paying purchase rates or cash advance rates.
Where things can get complex, is in the calculation of interest free periods. A mistake some cardholders make is assuming that their interest-free days start again for every new purchase made. It’s important to remember that your interest is charged according to your billing cycle, not from the first day you make a purchase on the credit card.