For Quick Alerts
For Daily Alerts

Interest Free Period On Credit Card: Be Careful In Understanding Or Lose Money


When selling a credit card, executives of banks and institutions selling the cards often talk of interest free grace period of 45-50 days.

While that is of course the case and they are not lying, what you need to understand that every transaction does not have a grace period of 45-50 days.

Interest Free Period On Credit Card: Be Careful In Understanding Or Lose Money
Let us now understand this with an example. Let us say that Vijay has taken a credit card from a bank.

Now, let us say that Vijay's billing cycle would be from 5th of every month and he would be handed 45 days, to pay the bill, which means he has to pay the same by the 25th of the subsequent month. If he underatkes a trsnaction on April 6, his due date becomes May 25.

Now, if has undertakes a transaction on the 6th of each month, he gets a grace period of 45-days.

But, for example, if he has undertaken a transaction on 4th of each month, since his billing cycle is 25th of each month, he would get a grace period of just 21 days.

If he calculates 45-days from the 4th, he is making a mistake and will end-up paying interest charges. So, be careful.

This is the case for every credit card and if you undertake a huge transaction on the first date of your billing cycle you stand to gain or else you stand to lose.

So how do you benefit?

If you are a person who spends large amounts on credit card, it certainly benefits you. This is because, you pay by credit card and avail the interest free period. In the meantime, the funds meant to pay the credit card bill continues to attract interest in your savings account.

If you have two credit cards, make sure that you use them alternatively at the start of the credit cycle. However, it is important to also remember that if both the credit cards have a similar billing cycle, you would not gain much.


Why you should pay the entire amount outstanding?

It is important to understand that credit card outstandings in its entirety or else you may end-up paying huge interest of close to 36-45 per cent per annum, depending on the bank.

We have covered an article on why you should pay the entire amount outstanding, which readers could read here

Read more about: credit card
Company Search
Enter the first few characters of the company's name or the NSE symbol or BSE code and click 'Go'


We use cookies to ensure that we give you the best experience on our website. This includes cookies from third party social media websites and ad networks. Such third party cookies may track your use on Goodreturns sites for better rendering. Our partners use cookies to ensure we show you advertising that is relevant to you. If you continue without changing your settings, we'll assume that you are happy to receive all cookies on Goodreturns website. However, you can change your cookie settings at any time. Learn more