Introduction
The interest-free period of a credit card falls between the transaction date and the due date of payment. This period can range between 18 to 55 days, depending on the credit card transaction date. Banks do not charge any interest on credit card transactions during the interest-free period as long as the card users make the full bill payment within the due date.
An interest-free period can be beneficial to credit card users. If you are a credit card user, here is how you make the most of it:
- Spend big during the initial period of the billing cycle
Making big-ticket purchases with your credit card in the initial phase of your credit card billing cycle has two key benefits.
- It gives you more than one month for repayment
- It allows efficient cash management since you can use the amount for other important or priority uses
Let’s take an example to understand how this works. Suppose your billing cycle starts from the 5th of each month and your bill due date falls on the 24th of every month. If you have made some high expense purchases with your credit card on April 6, the transaction gets included in the bill generated on May 4. You will then have to repay the bill by May 24. Thus, you can benefit from an interest-free period of a maximum of 49 days.
However, if you purchase through your card on May 1, the transaction will be included in the bill generated on May 4. This will have to be repaid by May 24. Thus, your interest-free period will be cut short to 23 days. Hence, try to make big-ticket transactions during the beginning of your credit card billing cycle to benefit from the extended interest-free period.
- Smart use of multiple credit cards
With multiple credit cards that have different due dates, you can make the most of the grace period by using different cards for various transactions as per the residual interest-free period available.
Let’s assume that you have two credit cards, ‘Card 1’ and ‘Card 2’ with the bill due dates of the 2nd and 17th day of every month. If you use Card 1 for transactions between 3rd and 17th and Card 2 for purchases between 18th and 1st of every month, it can fetch a maximum interest-free period for all transactions put together. Always consider the reward points, cash back or other offers that are available on various credit cards before choosing one that has maximum benefits on transactions to be made.
- Pay credit card dues within the due date
If you do not repay your credit card transactions within the due date, it can attract heavy interest costs between 24-49% per year. This is applicable from the transaction date up to the actual repayment date. You may additionally incur a late payment fee of a maximum of Rs. 1,300 per billing cycle, depending upon the terms and conditions of the credit card issuer. Non-payment of a credit card bill can also result in revocation of the interest-free period for fresh credit card transactions till the time you clear the unpaid bill in full.
Therefore, try to repay the full credit card bill amount by the due date. If you face any difficulties in tracking multiple credit card bill due dates, try to set mobile reminders for the same. Many mobile applications can remind you before the due dates through push notifications and even WhatsApp messages. Not paying dues on time can have a significant impact on your credit score.
Additional Reading – Check your free credit score online
What to do if you are unable to clear your credit card dues within the due date?
In a scenario where you are unable to clear your credit card bill on time, you must try to convert the unplayable portion of the bill amount into EMIs. The interest rate on EMI conversions is substantially lower than different finance charges that could be levied. For fresh credit card transactions post-EMI conversion, you can benefit from the interest-free period.
- Avoid cash withdrawals through credit card
The interest-free period will not be applicable if you make cash transactions using your credit cards. ATM cash withdrawals through credit cards can attract heavy finance charges from the day of cash withdrawal till you make the full repayment. Additionally, ATM cash withdrawals may attract cash advance fees of approximately 3.5% of the total amount withdrawn.
Therefore, if you are a credit card user, always try to avoid withdrawing cash using your credit cards as far as possible. In case it is unavoidable, you should ensure to repay the total withdrawn amount as soon as possible to avoid paying any additional finance charges.
Endnote
With the help of the above-mentioned tips, you can make the most of the interest-free period on your credit cards and maximize your benefits. This will help you in saving money while using the credit card facility.
Meta Descriptions
An interest-free period on credit card benefits users by providing buffer time before they must make the repayment of their credit card bills.