Interest free days: How to use them effectively

8 May 2008

Credit cards mostly come with some number of interest free days on purchases, usually 55 days but occasionally 44 days or even no interest free period at all. If you're wondering why the issuers of credit cards can afford to risk your never paying interest it's because the comfort and complacency brought about by interest free days means many people will forget to pay their entire balance off in time to avoid interest. As long as you remain aware of when you need to pay off your entire balance, however, you can come out on top in your credit card usage.

Interest free days and reward points

By only spending on your credit card within your means to pay it off before interest begins to accrue, you could earn enough reward points to not only match what you pay in extra annual fees, but also to make a profit on your usage of credit cards. You mustn't plan to use a credit card like this if you are not absolutely sure you can make every repayment. The higher interest rate of a rewards program credit card will mean larger losses if you begin using it as a line of credit.

Interest reduction on other debts

If you have a mortgage with a redraw facility or similar feature, then interest free days on purchases with a credit card could help you to reduce interest even on your home loan. Doing your usual spending with your credit card means you can keep the entirety of your funds in your mortgage for the longest possible time. As interest is calculated frequently, this means the size of your loan is reduced for the purposes of interest calculations even if it is not reduced in reality.

Please visit our comparison pages and interest free credit card pages for excellent selections of top notch credit cards.

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