Understanding Interest-Free Credit Periods

Published: 03rd November 2009
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Many banks offer interest-free credit periods. Take advantages of this benefit, and you could avoid interest payments and save each month.

Traditionally, credit cards have featured high interest rates, which have put many people off the idea of getting one. However, interest-free credit has enabled consumers to make use of credit without incurring interest costs, provided they use this feature properly.

Interest-free credit is quite possibly one of the greatest advantages offered by credit cards, and responsible credit usage enables cardholders to enjoy ongoing periods of interest-free purchasing. We've taken a look at interest-free credit periods, and how you can use it to avoid high interest costs.

Is interest-free credit really interest-free?

Yes it is! "Interest-free credit" is exactly what it sounds like. While the length of the interest-free period may differ from bank to bank, the underlying principle remains the same: It's a period of time, from the date of your first purchase in a month, in which you'll be able to settle your balance without incurring any interest costs.

The obvious advantage of this feature is that cardholders are able to make purchases on credit, but avoid paying the usual interest costs if they settle their balances on time. Essentially, if you take advantage of the interest-free period offered to you, you won't have to pay for the luxury of borrowing money.

How do I take advantage of my interest-free credit period?

It's really quite simple to use the interest-free period on your credit card successfully. In fact, responsible credit card users will always endeavour to settle outstanding balances as promptly as possible - usually within a month of their purchase.

All you need to do is ensure that you settle your debt, in full, within 55 days (or the respective period for your credit card) of the purchase. Once you've done this, your interest-free period will be restored - enabling you to enjoy a fresh round of interest-free credit.

For example - assuming your credit card monthly cycle runs from the first to the last day of the month - if you spend R5,000 for the month of January, you'll have until the 25th of February to repay the amount, in full, in order to avoid paying any interest on your expenditure. Once you've settled this outstanding balance in full, your interest-free period will begin again.

Thus, if you always settle your card balances promptly and within the interest-free period, you'll be able to enjoy a continuous interest-free loop.

Tips for enjoying interest-free credit

Sometimes, it's not possible to settle large purchases within a short period of time - think of home repairs, car maintenance and furniture purchases. However, there are ways to increase your ability to enjoy interest-free credit on a regular basis. For example:

• Consider delaying purchases that aren't urgent. If you've had a particularly costly month, wait until you've settled your outstanding balance before purchasing non-essential items.

• Whenever possible, follow this tip from wise credit users: Don't spend this month what you won't be able to settle in full next month.

• Settle outstanding credit card balances in full in order to qualify for the interest-free period on any current and future purchases.

Explore the range of South African credit cards available online through Plastiq, and find the one that best matches your needs. Apply now, and you could be enjoying interest-free credit before you know it.

About the Author

Plastiq is an online credit card comparison and application site offering a range of top credit cards, including American Express credit cards and Nedbank Business credit cards.

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