Interest free days on credit cards can be a great benefit if you properly understand them, but quite costly if you either don’t understand them, or worse yet, think you do but really don’t. Here is a quick guide for better understanding interest free days on credit cards, which might help you avoid being burned by something you may not completely understand, and could actually be a great advantage if used correctly.
What Does ‘Interest Free Days’ Mean?
You might have seen various credit cards touting “44” or “55 interest free days” often prefaced by the words “Up to”. Such an option might seem like it’s too good to be true, but understanding the wording is critical to getting the most from this credit card benefit.
The way you may be expecting an interest free period of days to take place, might not occur exactly how you are envisioning it. This benefit can largely depend upon the statement and billing periods for your card as well as when your purchases are made. And while a card might tell you “up to 55 days,” this might be the maximum number of days, but may not apply to every purchase you make.
How Does It Work?
So how exactly do interest free days work? Consider this, the first day of your billing period is the first of the month, and the last day is 30th, but your bill is not due until the 14th day of the next month. If you make a purchase on first day of month, this might mean you have a total of 44 interest free days on that particular purchase (until your bill is due), but if you make a purchase later than that date, your interest free time period is reduced by the particular number of days that have passed since the first day of the billing period. For example, if you made a purchase on the 10th day of your statement period, your interest free days might only be 34 days (since there is 34 days left until your bill is due), not 44 days from the date of that particular purchase.
What to Watch For
So you see, not understanding the exact way interest free days can work could end up costing your dearly. If you bought something at the end of your billing period under the assumption that you had another 44 days interest free, and you only really had 14 days, you could end up being charged interest for those extra 30 days, and depending upon the number and amounts of such purchases, as well as the associated interest rate, this could be a very costly error to make.