How to Use Credit Card Interest-Free Period?

Credit Cards are one of the greatest financial inventions. They eliminate the need to carry wads of cash and allow you to shop instantly on credit. But while Credit Cards are powerful financial tools, the interest on not clearing the outstanding balance before the due date often discourages many people.

But do you know that Credit Cards come with an interest-free period? If used wisely, it can protect you against the interest. Let’s look at what is interest-free period of Credit Card and 5 tips for using it wisely.

As the name suggests, the interest-free period is the grace period during which the bank does not charge interest on the outstanding Credit Card balance.

The Credit Card interest-free period can range from 18 days to 48 days. Clear the outstanding Credit Card bill within the interest-free period, and you don’t have to worry about the interest or any additional charges.

Let us try to understand the calculation with the help of an example. Mr Ranjit purchased a home appliance with his Credit Card on the 20^th day of the monthly cycle.

So, the interest-free period will be 30 days if the payment due date is 20 days (10 days remaining in the payment cycle + bill payment due date of 20 days). He won’t be required to pay any interest on the amount if the payment is made within the grace period of 30 days from the date of purchase of the appliance.

Here are 5 tips to correctly use the interest-free period of your Credit Card-

• Plan All the Payments and Transactions

Let’s assume you have a Credit Card billing cycle of 30 days starting from the 2^nd of this month and ending on the 3^rd of the following month. So, you can enjoy a more extended grace period by making purchases with your Credit Card at the start of the monthly cycle.

For instance, if the purchase is made on 3^rd January, you’ll have an interest-free period of 50 days (30 days from the billing cycle + bill payment due date of 20 days). In comparison, if the purchase is made on 25^th January, you’ll only get a grace period of 27 days.

• Pay Outstanding Bills on Time

The interest-free period only works if you clear the outstanding balance on or before the payment due date. If there is any outstanding balance even from the previous cycle, the user will be required to pay Credit Card interest.

So, ensure you thoroughly check the Credit Card statements and try to clear the outstanding balance so that no balance is carried forward to the next month.    

• Try to Avoid Cash Withdrawals

If you're a new Credit Card user, remember that the interest-free period is not available for cash withdrawals and payments. Therefore, you should compulsorily pay such cash-based transactions on Credit Cards before the due date without any grace period to save on interest and other charges.

Moreover, card providers also charge an additional fee for cash withdrawals through Credit Cards. So, unless there is no other option, try to avoid using your Credit Cards for cash withdrawals.

• Manage Expenses Across Credit Cards

If you’re using more than one Credit Card, you can take advantage of the grace period of both cards to better manage your expenses and avoid interest.

For instance, if the billing date of one of the Credit Cards is the 3^rd and the same for the other is the 20^th, use the first card for purchases at the start of the month and the other card for month-end purchases to have longer grace periods. Regularly track the Credit Card limit of both the cards to avoid going overboard. 

• Make the Payments in Advance

If you're very close to the due date, it will be better to make the Credit Card bill payment online. Payments through Cheque could take a few days to clear, and the due date might pass by then. In such cases, you'll be charged interest as per the Credit Card interest rate.

But if you prefer payments through Cheque, drop the same at least a few days before the due date to avoid late charges.

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