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Product Name Card

Auswide Bank Platinum Rewards Mastercard

Purchase Rate

Purchase Rate

20.24

% p.a

Interest Free Days

Interest Free Days

55

Annual Fee

Annual Fee

$99

for 12 months then $129

Late Payment Fee

$20

Go to site

Balance Transfer

Earn 20,000 Bonus Reward Points and pay 0% p.a. on balance transfers for 14 months
Product Name Card

Bank Australia Platinum Rewards Visa Credit Card

Purchase Rate

Purchase Rate

18.24

% p.a

Interest Free Days

Interest Free Days

55

Annual Fee

Annual Fee

$189

Late Payment Fee

$15

Go to site
Product Name Card

P&N Bank Visa Platinum

Purchase Rate

Purchase Rate

11.31

% p.a

Interest Free Days

Interest Free Days

45

Annual Fee

Annual Fee

$99

Late Payment Fee

$5

Go to site
Product Name Card

Police Credit Union Extralite

Purchase Rate

Purchase Rate

13.99

% p.a

Interest Free Days

Interest Free Days

44

Annual Fee

Annual Fee

$0

Late Payment Fee

$15

Go to site

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The 'interest-free period' on a credit card is actually more complicated than you may think. In simple terms, it’s the amount of time when you are not charged interest on a purchase – but just how that’s calculated may surprise you.

To make sure you don’t get stung with an unexpected interest charge on your next credit card bill, here are a few questions and answers that may help you.

What are interest-free days?

Most credit cards offer an interest-free period that’s usually between 40-55 days. However, this does not necessarily mean you have 40-55 days to pay it off before you start being charged interest. This is because the interest-free period depends on your statement cycle, not the purchase date.

If you see a credit card offering “45 days’ interest-free”, this actually refers to the maximum interest-free days available on a purchase. To get the full 45 days, you need to make the purchase on the first day of your monthly credit card statement cycle. Otherwise, instead of getting the maximum interest-free days, you will receive less than the maximum.

How is an interest-free period calculated?

To explain how interest-free days are calculated, let’s say you buy a new TV. Let’s also assume these two things:

  • Your latest credit card statement cycle lasts from 1 December to 31 December
  • Your maximum interest-free days is 45 days

Example 1: The maximum interest-free period

  • You buy the TV on 1 December
  • You have until 15 February to pay the full amount off your credit card before you start being charged interest

Total number of interest-free days = 45 (the maximum interest-free days)

Example 2: The minimum interest-free period

  • You buy your TV on 31 December – the same day your statement cycle ends
  • You have until 15 February to pay the full amount off your credit card before you start being charged interest

Total number of interest-free days = 15 (the minimum interest-free days)

How can I avoid being charged interest on my credit card?

If you don’t want to get stung with interest, you need to pay off your full closing credit card balance on time. This can be especially important for younger Australians or those on lower incomes who lack financial literacy. 

If you fail to pay the full closing balance by the due date, you will be charged interest on the purchases listed on your statement. Interest is usually calculated by banks and credit unions based on the purchase date; if the interest is not repaid, it will roll over to your next statement cycle.

To help you pay off your credit card on time, consider the following suggestions:

Select a credit card with an interest-free period that best suits your budget

Different credit cards offer different maximum interest-free days. Although 40-55 is standard, some offer up to 62 interest-free days. RateCity has a credit card comparison tool to help you search for a card that meets your needs.

Ask your provider to move your statement period

Many credit card issuers allow you to pick a statement period on your preferred dates.

For example, if you get paid on the 15th of each month, you might set your credit card balance due date for, say, the 20th.

Set up a reminder to make the payment

Life can get busy and bills get missed, so do yourself a favour and set up a reminder on your calendar to pay your credit card bill. You can do this on your phone or computer calendar or even pocket diary. Just pick whatever you’re most likely to see.

Set up a direct debit from your bank account

As long as you have enough money in your account each month, this is a simple way to pay your credit card bill on time. Most banks and credit unions offer this direct debit service free of charge.

  • It may be worth exploring the benefits and risks of Buy Now, Pay Later platforms, such as Afterpay or Zip Pay, if you're looking to access credit without being charged interest. 

What happens if I can’t pay the full balance of my credit card on time?

If you're not in a position to pay the full amount off on the due date, there are steps you can take to help reduce the credit card interest:

Pay off as much as you can

Every extra dollar you pay off your credit card will save you paying more interest. On your monthly statement, there is a minimum repayment amount, but it’s often a good idea to try to pay as much over this minimum amount as you can afford.

Be disciplined

Try not to put more purchases on your credit card until you pay off your debt.

Low-rate options

Consider switching to a lower-rate credit card once you've paid off your balance in full to avoid snowballing debt in the future. You may also want to consider prioritising low fee options as well to reduce ongoing costs. 

How does credit card interest work?

Generally, when we talk about credit card interest, we mean the purchase interest rate, which is the interest charged on purchases you make with your credit card.

If you don’t pay your full balance each month (or even if you pay the minimum amount), you are charged interest on all the outstanding transactions and the remaining balance. However, interest is also charged on cash advances, balance transfers, special rate offers and, in some cases, even the fees charged by the company.

The interest rate can vary, depending on the credit card. Some have an interest-free period, otherwise you start paying interest from the day you make a purchase or from the day your monthly statement is issued. So avoid interest by paying the full amount promptly.

How is credit card interest charged?

Your credit card will be charged interest when you don’t pay off the balance on your credit card. Your card provider or bank charges you the individual interest rate that is associated with your card, which is usually between 10 and 20 per cent. 

The interest will be added onto your bill each month or billing period if you don’t pay off the balance, unless you are in an interest-free period.

You will be charged interest on anything that hasn’t been paid for inside the interest-free period. Usually you will receive a notice on your bill or statement saying you will be charged interest so you have some form of notice before you’re charged.

How do you use a credit card?

Credit cards are a quick and convenient way to pay for items in store, online or over the phone. You can use a credit card as a cashless way to pay for goods or services, both locally and overseas. You can also use a credit card to make a cash advance, which gives you the flexibility to withdraw cash from your credit card account. Because a credit card uses the bank’s funds instead of your own, you will be charged interest on the money you spend – unless you pay off the entire debt within the interest-free period. If you pay the minimum monthly repayment, you will be charged interest. There are many different credit card options on the market, all offering different interest rates and reward options.

How do you use credit cards?

A credit card can be an easy way to make purchases online, in person or over the phone. When used properly, a credit card can even help you manage your cash flow. But before applying for a credit card, it’s good to know how they work. A credit card is essentially a personal line of credit which lets you buy things and pay for them later. As a card holder, you’ll be given a credit limit and (potentially) charged interest on the money the bank lends you. At the end of each billing period, the bank will send you a statement which shows your outstanding balance and the minimum amount you need to pay back. If you don’t pay back the full balance amount, the bank will begin charging you interest.

What is a balance transfer credit card?

A balance transfer credit card lets you transfer your debt balance from one credit card to another. A balance transfer credit card generally has a 0 per cent interest rate for a set period of time. When you roll your debt balance over to a new credit card, you’ll be able to take advantage of the interest-free period to pay your credit card debt off faster without accruing additional interest charges. If your application is approved, the provider will pay out your old credit card and transfer your debt balance over to the new card. 

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