subject: How credit card interest free periods work [print this page] How credit card interest free periods work
There are two basic types of credit card interest-free periods: there's the monthly type which allows you to borrow in the short term and, if you're clever with it, treat a credit card like a debit card with extra benefits and rewards, and there are longer 0% interest periods.
The former aren't generally advertised but, ironically, can often be more useful to everyday credit card users than the other type which are used as hooks to draw people in to using credit cards with a particular providers.
So the first thing to note when you compare credit cards is that you'll have to look for two types of interest free period and take note of both.
This is not to say, of course, that interest free periods are the only thing that should concern you when you look for a new card.
There are numerous other factors including security, rewards and whether you're looking at traditional applications or instant decision credit cards but here we're mostly going to be concerned with interest free as a factor in choosing a new financial product.
To take the monthly interest free period first: this usually lasts for anything from 45 to 52 days. In other words, the length of time between your credit card bills.
Note that some transactions, such as cash withdrawals, aren't subject to an interest free period of this type which is why they should be avoided at all costs by plastic card holders.
To avoid paying monthly interest on a credit card, however, it's important that you not only pay off the balance of the card in full but also that you pay it off far before this interest-free period ends in order for the payment to be applied to the account.
This is because banks and building societies can take a while to process transactions.
The other type of interest free period relates to the monthly deals in that the former doesn't always invalidate the latter.
For example, 0% balance transfer credit cards that have an interest free period of 3 months will still mean that purchases made on the card are subject to an interest free period (although how easy it'll be to pay this off is another matter).
On the other hand 0% purchases credit card holders won't have to worry about the monthly break from interest since the lack of interest holds for all the months of the deal.
