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Purchase Rate

20.24%

Interest Free Days

55

Annual Fee

$80

$20

More details

Purchase Rate

0.00%

for 17 months then 20.24%

Interest Free Days

55

Annual Fee

$0

for 12 months then $87

$20

More details

Purchase Rate

12.99%

Interest Free Days

55

Annual Fee

$59

$15

More details

Purchase Rate

20.24%

Interest Free Days

55

Annual Fee

$95

$20

More details

Purchase Rate

20.24%

Interest Free Days

55

Annual Fee

$375

$20

More details

Purchase Rate

20.24%

Interest Free Days

55

Annual Fee

$295

$20

More details

Purchase Rate

20.24%

Interest Free Days

55

Annual Fee

$95

$20

More details

Purchase Rate

20.24%

Interest Free Days

55

Annual Fee

$425

$20

More details

Purchase Rate

20.24%

Interest Free Days

55

Annual Fee

$30

$20

More details

Purchase Rate

20.24%

Interest Free Days

55

Annual Fee

$0

for 12 months then $30

$20

More details

Purchase Rate

20.74%

Interest Free Days

55

Annual Fee

$64

for 12 months then $129

$30

More details

Purchase Rate

19.99%

Interest Free Days

55

Annual Fee

$129

$30

More details

Purchase Rate

19.74%

Interest Free Days

44

Annual Fee

$30

$15

More details

Learn more about credit cards

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.

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.

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

If you are 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.

Consider a balance transfer – Balance transfer credit cards usually have a much lower interest rate for a set period of time, but are only available if you transfer the debt from your old credit card (or cards) to the balance transfer credit card. However, you need to check out the terms of these cards carefully, as after a set period the interest will usually revert to a higher rate. RateCity has a balance transfer tool to help you compare the cards currently on offer.

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

Frequently asked questions

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.

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. 

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.

How to calculate credit card interest

Credit card interest can quickly turn a manageable balance into unmovable debt. So being able to understand how interest rates translate into dollars is an important skill to acquire.

The common mistake people make is focusing on the credit card’s annual percentage rate (APR), which often sits between 15 and 20 per cent. While the APR does provide a rough idea of how much interest you’ll pay, it’s not entirely accurate.

This is because you actually accrue interest on your balance daily, not annually. So, you need to work out your daily periodic rate (DPR). To do this, divide your card’s APR by the number of days in a year (e.g. 16.9 per cent divided by 365, or 0.05 per cent). You can then apply this figure to the daily balance on your credit card.

How to get a free credit card

There's no such thing as a free lunch. All credit cards come with associated costs when used to make purchases, even if it’s simply the cost of making repayments.

However, many lenders offer incentives for customers such as a $0 annual fee or 0 per cent interest on purchases during an introductory period. Additionally, paying off your balance in full during an interest-free period means you could only have to pay back the cost of purchases without interest. You could also be eligible for additional rewards such as cashback during that time, saving you more money.

What is a credit card?

A credit card is a payment method which lets you pay for goods and services without using your own money. It’s essentially a short-term loan which lets you borrow the bank’s money to pay for things which you can pay back – potentially with interest – at a later date. Credit cards can also be used to withdraw money from an ATM, which is known as a cash advance. Because you’re borrowing money from a bank, credit cards charge you interest on the money you use (unless you repay the entire debt during the interest-free period). When you apply for a credit card, the bank gives you a credit limit which sets the maximum amount you can borrow using your card. Credit cards are one of the most popular methods of payments and can be a convenient way of paying for goods and services in store, online and all around the globe.

How to pay a credit card

There are a few ways to pay a credit card bill. These include:

  • BPAY - allows you to safely make credit card payments online.
  • Direct debits - set up an automatic payment from your bank account to pay your credit card bill each month. You can choose how much you want to pay of your credit card bill when you set up the auto payments.
  • In a branch.
  • Via your credit card provider's app.

How to pay a credit card from another bank

Paying or transferring debt from one lender to the other is called a balance transfer. This involves transferring part or all of the debt from a credit card with one lender to a credit card with another. As part of the process, your new lender will pay out the old lender, so that you now owe the same amount of money but to a new institution.

Many credit card providers offer an interest-free period on balance transfers to help new applicants better handle their debt. During this period, cardholders are not required to pay interest on the debt they brought over from the other card. This can be a great opportunity for consumers to pay off credit card debt with no interest. There are often fees associated with balance transfers; normally, these are a percentage of the amount transferred.

So make sure you read the terms and conditions of the card before transferring any debt across.

Can a pensioner get a credit card?

It is possible to get a credit card as a pensioner. There are some factors to keep in mind, including:

  • Annual income. Look for credit cards with minimum annual income requirements you can meet. 
  • Annual fees. If high fees are a concern for you, opt for a card with a low or $0 annual fee. 
  • Interest rate. Make sure you won’t have any nasty surprises on your credit card bill. Compare cards with a low interest rates to minimise risk.

Should I get a credit card?

Once you've compared credit card interest rates and deals and found the right card for you, the actual process of getting a credit card is quite straightforward. You can apply for a credit card online, over the phone or in person at a bank branch. 

Current Interest Rate

This is the current interest rate on your existing credit card.

How do you pay off credit cards?

The best way to pay off a credit card bill is to set a realistic spending budget and stick to it. Each month, you’ll get a credit card statement detailing how much you owe and how long it will take to pay off the balance by making minimum repayments. If you only make the minimum repayments, it will take you years to pay off your outstanding balance and add extra costs in interest charges. To avoid any extra charges, you should pay the entire bill. 

How easy is it to get a credit card?

For most Australians, there are no great barriers to applying for and getting approved for a credit card. Here are some points that a lender will consider when assessing your credit card application.

Credit score: A bad credit score is not the be all and end all of your application, but it may stop you being approved for a higher credit limit. If your credit score is less than perfect, apply for the credit limit that you need, rather than the one you want.

Annual income: Most credit cards have minimum annual income requirements. Make sure you’re applying for a card where you meet the minimum.

Age & residency: You need to be at least 18 years old to apply for a credit card in Australia, and most require that you are an Australian citizen or permanent resident. However, there are some credit cards available to temporary residents.

What should you do if your credit card is compromised?

Credit card fraud is a serious problem. If your credit card is compromised and you’re wondering what to do, here are a few precautionary steps to take.

Contact you credit provider – Get in touch will your credit card provider. If you feel your card has been compromised, you should be able to lock or block it.

Monitor your accounts – Keep an eye on your credit card accounts. Any unauthorised transactions could be a sign your credit card has been compromised.

Check your credit rating – It’s also important to check your credit rating, to ensure you’re not a victim of identity theft or some other financial mischief.

How do credit cards work?

Think of credit cards as a short-term loan where you use the bank’s money to buy something up front and then pay for it later. Unlike a debit card which uses your own money to pay, a credit card essentially borrows the bank’s money to fund the purchase. When you apply for a credit card, the bank assesses your income and assigns you a credit limit based on what you can afford to pay back. At the end of each billing cycle, which is usually monthly, the bank will send you a statement showing the minimum amount you have to pay back, including any interest payable on the balance.

How do you apply for a credit card?

You can apply for a credit card online, over the phone or in person at the bank. Once you’ve compared the current credit card offers, the application process is quick and easy. Before you get your application started, you’ll need to gather your personal information like proof of ID, payslips and bank statements, proof of employment and details of your income, assets and liabilities. To be eligible for a credit card, you’ll need to be an Australian citizen over 18 and earn a minimum of $15,000 each year. Once you’ve applied for a credit card, you should get a response fairly instantly. If your credit card application has been approved, you should receive a welcome pack with your new credit card within 10-15 days.

What should you do when you lose your credit card?

Losing your credit card is a serious situation, and could land you in financial trouble. Here is a simple guide detailing what to do when you lose your credit card.

Lock you card – Contact your provider and inform them about your lost credit card. From here lock, block or cancel your card.

Keep track of transactions – Look out for unauthorised credit card transactions. Most banks protect against fraudulent transactions.

Address recurring charges – If your card is linked to recurring charges (gym membership, rent, utilities), contact those businesses.

Check credit rate – To ensure you’re not the victim of identity theft, check your credit rating a month or two after you lose your credit card.

Why should I check my credit rating?

There are two reasons you should check your credit rating: so you have a better understanding of your financial position, and so you can take action (if necessary) to improve your credit rating.

Lenders use credit ratings or credit scores to assess loan applications. The higher your score, the more likely you are to get approved, and the more likely you are to be charged lower interest rates and lower fees. Conversely, the lower your credit score, the less likely you are to get approved, and the more likely you are to be charged higher interest rates and higher fees.