A credit card's interest-free or grace period is the time between the transaction date and the payment due date. It can range anywhere from 18 to 55 days, based on the credit card transaction date. During this time, no interest is imposed on credit card transactions if the cardholder pays the entire bill on or before the due date.
If used wisely, the credit card interest-free period can be very beneficial. Here’s how you can make the most out of it:
It is very important that you plan your transactions based on your credit card billing date.
For example, if your credit card billing date is between May 5th and June 6th, try to make your payments at the start of the billing date. If you made a transaction on May 6th, you would have 50 days until you had to pay back the entire amount. But if you make a transaction in the middle of the month, say on May 20th, you'll only have 35 days until your payment is due.
Thus, managing your transactions according to your due date helps you to get the most out of your credit card's grace period or interest-free period.
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You must pay the total outstanding amount on or before the payment is due to qualify for the interest-free period. If any balance from the previous month is carried forward to the next billing cycle, you will be responsible for paying interest on the balance. Pay your credit card bills online, if possible.
Say you write a cheque to pay off your debt, but it takes longer than a day for the bank to credit the amount (to a credit card), for whatever reason. Because you selected to pay by cheque, you would be obligated to pay interest for that extra one day. Internet banking and mobile banking are two online options that could make the payment procedure less stressful.
Many credit card users are unaware that cash withdrawals do not qualify for an interest-free period. That is, if you withdraw cash from your credit card then you will not get an interest free period on the withdrawal. In fact, you will be charged cash withdrawal charges along with interest from the date of withdrawal. This cost will be charged even during the grace period, so avoid making cash withdrawals if you want to avoid incurring interest.
By splitting your expenses between two credit cards, you can take advantage of the interest-free time. Payment of bills becomes easy if the due dates of your credit cards coincide and you have a grace period on both cards.
For instance, if your 'card A' has a billing date of May 15th and your 'card B' has a billing date of May 1st, you should use 'card A' for purchases made after May 15th and 'card B' for purchases made before May 15th. This way, you'll be able to get a longer interest-free term on both credit cards this way.
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Using credit cards can be risky. However, credit card customers can take advantage of the interest-free time to reap the benefits of zero interest. Though paying your outstanding dues all at once can be difficult, careful planning can help you avoid paying more than you owe.