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Got an interest-free period on your credit card? Use it wisely

If you make use of the interest-free period on your personal credit card and pay your full closing balance by the due date on your statement each month, you could avoid paying interest on your purchasesdisclaimer.

If your credit card – or the card that you’re thinking about applying for – comes with an interest-free period on purchasesdisclaimer, then it’s in your best interest (pardon the pun) to learn how this feature works.

What’s an interest-free period?

Think of the interest-free period on purchases on a personal credit card as a potential buffer. When it applies, it’s a period of time in which you won’t be charged interest on new eligible purchasesdisclaimer. This period can run from the beginning of a statement period to the payment due date on a credit card.

But remember. Not all purchases get the full amount of interest-free days and some transactions may not get any at all (for example, at ANZ, cash advances). You may also have to satisfy certain conditions to get the benefit of an interest-free period on purchases (more on that below).

Check your credit contract to learn whether an interest-free period applies to your credit card account and when and how it applies.

How long have you got?

The interest-free period on purchases can vary depending on the provider and the credit card. Not all cards have one. If you do have an interest-free period on purchases, it could be up to 44 days, up to 55 days, or something elsedisclaimer. If you’re not sure, check your credit card contract or ask your provider.

A tripping point for some people is the “up to” bit. Typically, the interest-free period that is offered on purchases is “up to” a certain number of days. At ANZ, for example, if you have “up to 55” interest-free days, this doesn’t mean you have 55 days interest-free after every single purchase. Rather, because an interest-free period runs from the beginning of a statement cycle until the payment due date, the number of interest-free days will depend on when you make that purchase within your statement cycle (and the type of purchase).

For example, at ANZ if an account holder currently has up to 55 interest-free days on purchases and if their credit card statement period is from June 1st to 30th, the account holder's repayment will be due on July 25th. This is 55 days after the first day of that statementdisclaimer.

If someone had a zero balance at the beginning of the statement cycle, and if they bought milk with that card on June 1st that person could have 55 interest-free days on that purchase if they pay off their current statement balance in full by July 25th (the due date). Let’s say the account holder buys the milk on June 20th. In this scenario, the account holder would have a maximum of 35 days interest-free on the purchase (provided they had a zero balance at the beginning of the statement cycle and paid off their current statement balance in full by the due date of that statement cycle)disclaimer.

Remember, it’s “up to” 55 days, not 55 days for every purchase.

Missed a payment or haven’t paid in full? You could lose your interest-free period if you have one

At ANZ, if you have an interest-free period on purchases and if you don’t pay the full closing balance (or, if applicable the ‘closing balance’ less instalment plan and buy now pay later plan balances) shown on your statement by the due date each monthdisclaimer, the interest-free period will not apply and the outstanding purchases balance on your account will attract interestdisclaimer.

Say someone ordinarily pays the balance of their ANZ personal credit card in full each month and at the start of their statement cycle had a $0 balance. This month, that person owes $2,500 but can only pay $2,000 towards their balance by the payment due date. This means that the $500 balance owing will generally attract interest from the day after the payment due datedisclaimer. It also means that this person will lose the benefit of the interest-free period on purchases for at least the next statement period, meaning that from the next statement period they will accrue interest on new purchases from the day they make themdisclaimer.

To regain the benefit of an interest-free period on purchases, that person will either need to ensure the closing balance at the end of a statement cycle is zero, or pay the full closing balance shown on a subsequent statment by the relevant due date.

You may also have to satisy other conditions to get the benefit of an interest-free period on purchases. So remember to check the credit contract that applies to the relevant account for details.

Learn more about credit card interest

The truth about the credit card minimum repayment

While you can choose to simply make the minimum repayment on your personal credit card each month, doing so can come at a cost.

Read article

Reviewing how you use your card

Before you apply for a credit card, it’s a great idea to have a think about how you may be likely to use the card.

Read article

Information in this article refers to personal credit cards, is general in nature only and does not take into account your personal objectives, financial situation or needs. 

By providing this information ANZ does not intend to provide any financial advice or other advice or recommendations. You should seek independent financial, legal, tax and other relevant advice having regard to your particular circumstances.

The information is current as at June 2019 and may be subject to change. ANZ recommends you review your personal credit card contract for information about the terms that apply to you.

ANZ interest rates and fees and terms and conditions are subject to change. Refer to the current credit card interest rates, fees and terms for further information and current interest rates, fees and terms. 

Applications for credit at ANZ are subject to ANZ’s credit approval criteria, terms, conditions and fees and charges apply. Australian Credit Licence Number 234527

At ANZ, if your account has interest free periods on purchases, you can avoid paying interest on the purchases balance by always paying the full Closing Balance shown on each statement of account by the applicable due date. If you don’t pay the full Closing Balance shown on a statement of account by the applicable due date, you will generally be charged interest on your purchases balance from the day after the Due Date shown on that statement.  Not all transactions (e.g., at ANZ cash advances) get the benefit of interest free days. Refer to the credit contract that applies to the relevant account for details.

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Credit card providers can offer credit card accounts with interest free periods on purchases and some credit card accounts without. If you’re unsure whether an account has interest free periods on purchases please refer to the credit contract for that account. 

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Not all transactions (e.g., at ANZ cash advances) get the benefit of interest free days. Refer to the applicable credit contract for details of which (if any) transactions are eligible for interest free days.

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This is an example only. Refer to the credit contract that applies to the relevant account for details.

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This is an illustrative example only and may not be reflective of what applies to your credit card account. The example assumes that the milk is a purchase that contributes to the purchase balance, the customer had the benefit of interest free days at the commencement of the statement cycle in which the milk was purchased.

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Assuming no over limit or overdue amounts apply.

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This interest will be generally be charged on the purchases balance from the day after the applicable Due Date shown on the statement of account.

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This assumes that the customer had the benefit of interest free period at the commencement of the statement cycle.

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This is an illustrative example only and may not be reflective of what applies to your credit card account. The example assumes that the milk is a purchase that contributes to the purchases balance.

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