Credit cards offering up to three months interest-free

Credit cards offering up to three months interest-free

Buy now… and pay much later. There are a handful of credit cards in Australia that allow you to do just that.

More than 100 credit cards on the RateCity credit card database have maximum interest-free periods of 55 days.

But Flexigroup, Beyond Bank, People’s Choice Credit Union and Bank of Us have credit cards with even longer interest-free periods:

Credit card Interest rate (ongoing) Annual fee Interest-free days (max.)
Flexigroup Skye Mastercard 23.99% $99 90
Beyond Bank Low Rate Visa Credit Card 12.49% $49 62
People’s Choice Credit Union Visa Credit Card 12.95% $59 62
Bank of Us Visa Credit Card 9.99% $39 57

Regardless of the credit card you choose, it’s important to use it responsibly, because if you don’t manage the repayments, you might find yourself in a debt trap.

Why 55 days can sometimes mean 25 days

One thing to be aware of with interest-free periods is that you can’t assume you’ll always be entitled to the exact number of days quoted.

That’s because most credit card providers talk about “maximum” interest-free periods or interest-free periods of “up to” a certain number of days.

With most credit cards, the interest-free period begins not when you make a purchase but at the start of your statement cycle.

For example, let’s say your credit card has an interest-free period of up to 55 days, and that the card’s cycle begins on the first day of each month – January 1, February 1, March 1, etc. Any purchase made during January would be due on February 25 (or January 1 + 55 days).

So a purchase made on January 1 would have an interest-free period of 55 days, but a purchase made on January 31 would have an interest-free period of 25 days.

Start of cycle Interest-free period End of interest-free period
January 1 January 1 + 55 days February 25
February 1 February 1 + 55 days March 28
March 1 March 1 + 55 days April 25

Some low-rate credit cards don’t have interest-free periods

There are also credit cards that have interest-free periods of 0 days.

With these credit cards, you start running up interest immediately. So even if the rate is relatively low by credit card standards, your debt can quickly increase.

Credit card Interest rate (ongoing) Annual fee Interest-free days (max.)
Northern Inland Credit Union Low Rate Visa Credit Card 8.99% $0 0
Bank Australia Low Rate Visa Credit Card 9.39% $59 0
Heritage Bank Gold Low Rate 11.80% $0 0
Qudos Bank Lifestyle 12.34% $0 0
Suncorp Bank Standard Card 12.74% $55 0

How to switch credit cards

If you want to compare credit cards and then switch to a better alternative, there are two ways you can go about it.

The first way involves paying off the entire debt on your current card, closing it and then opening a new credit card account.

The second way involves doing a balance transfer, which means transferring the debt from your current card to your new card. However, there are likely to be a couple of catches:

  • You probably won’t be able to transfer your entire debt
  • You’ll probably have to pay a balance transfer fee

One positive, though, is that many balance transfer credit cards allow you an interest-free period (of, say, 12 months), which gives you the chance to clear all your debt without also having to pay interest.

If you do a balance transfer, you might want to close your old credit card account, so you don’t have to pay two annual fees. Also, it’s generally a good idea to avoid using the new card, because the interest-free offer will  apply only to the debt you transferred, not any new debt.

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Learn more about credit cards

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 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.

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.

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.

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 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.

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.

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 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.

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.

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.