Credit cards are incredibly popular financial tools. They not only allow you to buy something and pay for it later but also offers you the convenience of credit card interest free period on your purchases up to a certain number of days. This means that you can avoid paying interest charges on your purchases if you pay your outstanding balance by the due date every month. A credit card is the only tool that provides this facility. Continue reading to know
How you can make the most of the credit card interest free period …
What is Interest-Rate?
Interest is the rate associated with borrowing money via your credit card account and is also referred to as an annual percentage rate (APR). The purchase interest cost is commonly advertised by banks or credit card lenders and refers to the rate levied on purchases made with a card if an interest-free period doesn’t apply.
What do you understand by credit card interest free period?
The no-interest period basically refers to the time period between a purchase made by the cardholder on a credit card and its payment due date. You are given this no-interest period as long as you clear the outstanding amount by the due date of payment. If you do not pay off the outstanding amount, you will have to pay finance charges that are also known as credit card interest rates. Your interest-free period is generally 30 days, i.e., the total number of days in your statement period. The additional no-interest period until your due date of payment is either 14 or 25 days, depending on the card you opt for. This means that your credit card has a no-interest period on purchases of up to 44 or 55 days.
How can you make the best of a credit card interest-free period?
Here are 3 useful tips that will help you make the best of the interest-free period in credit cards:
Plan your purchases:
If the last day of your billing cycle is near, you should spend in a way that you can avail a longer no-interest period. For instance, in the case that is mentioned above, if you want to buy something on 20th June, you can postpone that purchase to 24th June so that it falls on the first day of your next credit card billing cycle. With this, you can make the payment for this purchase on 10th August instead of 10th July. By postponing the purchase by just 4 days, you have saved AED 4000 on your bill during the July month. Just imagine if the outstanding dues on your credit card in the month of July are already AED 20,000, and your monthly income is AED 40,000. An extra AED 4,000 spent during the current billing cycle would have left an additional burden on your monthly budget.
Enjoy the perks of multiple credit cards:
You should divide your expenses if you own two separate credit cards with different due dates across them. You should utilize those cards in such a way that all the purchases are made at the starting of their respective due dates. This will ultimately help you avail a longer interest-free period. For instance, say that you own two different credit cards namely “Card A” and “Card B” with due dates of 1st and 15th of every month respectively. For credit card transactions occurring between the dates 1st and 15th, you should use Card A and for purchases between 16th and 31st, you should use Card B. Doing this will help you avail a longer interest-free period for all credit card transactions. Nonetheless, keep in mind that owning too many credit cards can take a toll on your credit score. Make sure that you keep track of multiple billing dates and due dates in order to avoid late payment charges and finance charges.
Pay attention to transactions that do not have a no-interest period:
Given below are a few scenarios in which you cannot avail an interest-free period:
(a) Cash advances:
Cash advances are cash withdrawals made from the credit card account. So, if you withdraw cash using your credit card then you will not get an interest-free period on cash advances. In fact, you’ll be levied cash advance charges in addition to the credit card interest rate.
(b) Revolving credit:
If you pay the minimum due amount which is generally 5% of the total bill but you fail to clear your dues in full, your credit-free period will end and you will not get a no-interest period on new transactions.
(c) No payment:
If you don’t even pay the minimum due amount by the payment due date then also you’ll not get an interest-free period on new credit card transactions. In fact, you’ll have to pay late payment charges and the lender might get your card blocked.