What does 55 days interest free really mean?
October 11th, 2006
Credit Card Tips - The truth about the ‘interest free period’
Many people seem oblivious to the reality behind ‘interest free periods’. Thinking you know the right thing (when it’s completely wrong) can potentially breed disaster.
Does it really mean you get 55 days interest free for every purchase you make?
No. It means that the maximum number of days you won’t be charged interest for a new purchase is 55 days.
Some credit cards offer 44 days or some other amount. Whatever it is, the specified number of days is the maximum number of interest free days. Let’s explain this concept with a simple example.
Say you had a credit card with up to 55 days interest free and your credit card statement starts on the 1st of every month and ends on the 30th of every month. If you have up to 55 days interest free, your credit card bill will be due on the 25th of the next month. For example:
- 1st April - first day of the credit card statement
- 30th April - last day of the credit card statement
- 25th May - the day your April credit card bill is due
This means that there is a total of 55 days from the 1st of April including the day your bill is due.
Now let’s say you made a purchase of $100 on the 1st of April. No interest will be charged on the amount of the purchase up to, and including, the 25th of May. You get 55 days interest free on the purchase billed to your credit card on the 1st of April.
- On the 1st of April you make a purchase of $100. No interest will be charged on the amount of that purcahse up to, and including, the 25th of May. You get 55 days interest free on that purchase.
- On the 20th of April you make a purchase of $150. No interest will be charged on the amount of that purchase up to, and including, the 25th of May. You get 35 days interest free on that purchase.
- On the 30th of April you decide to make a purchase of $200. No interest will be charged on the amount of that purchase up to, and including, the 25th of May. You get 25 days interest free on that purchase.
Interest Free Period Graphs
April
View larger image of the April calendar to see details
May
View larger image of the May calendar to see details
You will not get charged any interest on those two purchases if you were able to pay off your total credit card balance of $450 for the month of April.
If you were only able to make a minimum payment of say, $25, then you will be charged interest on the amount left over from April. That is, interest will be charged on $425. The amount of interest charged for your remaining April balance will show up in your next credit card bill.
Aren’t the Credit Card Providers Ripping me off?
No, not really. The term ‘interest free days’ isn’t a lie, it’s simply ambiguous. It’s only shady in the way that the majority of people see it one way, the meaning the firms would prefer you to think.
Remember that the days that statements begin, end, and are due depend on the bank’s operations. They will be different from bank to bank.
Hopefully this explanation clears up the confusion about interest free days. Don’t hesitate to leave a comment below if you have any questions or anything to add.
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Comparison of Top 9 Credit Card Offers
| Credit Card | Card Details | Purchase Rate | Cash Advance Rate | Balance Transfer Rate | Annual fee | Interest free days | |
|
11.89% p.a. on purchases. Winner of Money Magazine’s Award for Cheapest Credit Card. | 11.89%
 |
20.49% | 0% for 6 months | $45 | 55 | |
|
0% p.a. balance transfer for 6 months. | 11.99% | 15.99% | 0% for 6 months | $49 | 55 | |
|
11.99% p.a. on purchases. | 11.99% | 20.74% | 0% p.a. for 6 months | $65 | 55 | |
|
0% p.a. balance transfer for 6 months. | 12.99% | 18.24% | 0% for 6 months | $58 | 55 | |
|
0% p.a. balance transfer for 6 months. | 12.99% | 12.99% | 0% for 6 months | $59 | 55 | |
|
5.99% p.a. balance transfer for 5 months. | 13.24% | 13.24% | 5.99% for 5 months | $48 | 55 | |
|
1 Reward Point for every $1 you repay to your balance. | 13.99% | 20.99% | 0% for 6 months | $57 | 55 | |
|
5% off your petrol and and everything else you buy at BP. 1% off everything else you buy anywhere. | 19.89% | 19.89% | 2.90% for 12 months | $79 | 55 | |
|
0% p.a. balance transfer for 6 months. Every dollar spent contributes to reforestation, renewable energy, and other environmental initiatives. | 18.49% | 19.99% | 0% p.a. for 6 months | $49 | 55 |
October 16th, 2006 at 11:55 am
When would the next payment be required if I bought something on the 26th of May? Would it be the 19th of July?
October 18th, 2006 at 10:51 am
If you purchased something on the 26th of May, it will appear in your May statement. Your May statement will be due around the 24th of June.
If you purchased something on the 19th of July, it will appear in your July statement. Your July statement will be due around the 25th of August.
So if you make a purchase in a particular month, that amount will be due the next month by a due date depending on how many interest free days you get.
January 10th, 2007 at 10:52 am
[...] You only get 55 days interest free from the start date of your bill until the due date. Read our article about interest free days for a detailed explanation. 55 days interest free only applies to charges on your card from purchases made at stores, online, etc. It doesn’t include any cash withdrawls/advances from ATM’s. Cash advances are usually also charged at a higher rate than the 8.99% p.a available on this card. [...]
January 10th, 2007 at 12:03 pm
[...] You only get 55 days interest free from the start date of your bill until the due date. Read our article about interest free days for a detailed explanation. 55 days interest free only applies to charges on your card from purchases made at stores, online, etc. It doesn’t include any cash withdrawls/advances from ATM’s. [...]
January 10th, 2007 at 3:01 pm
[...] You only get 55 days interest free from the start date of your bill until the due date. Read our article about interest free days for a detailed explanation. 55 days interest free only applies to charges on your card from purchases made at stores, online, etc. It doesn’t include any cash withdrawls/advances from ATM’s. Cash advances are usually also charged at a higher rate than the 8.99% p.a available on this card. [...]
January 10th, 2007 at 3:53 pm
[...] You only get 55 days interest free from the start date of your bill until the due date. Read our article about interest free days for a detailed explanation. 55 days interest free only applies to charges on your card from purchases made at stores, online, etc. It doesn’t include any cash withdrawls/advances from ATM’s. [...]