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“An interest-free period is the time between the date you make a purchase with your credit card and the date your monthly payment is due...”

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An explanation of interest-free periods

If you have a credit card or you’re thinking of applying for one, you need to know what an interest-free period is – and how it can be used to your advantage.

An interest-free period is the time between the date you make a purchase with your credit card and the date your monthly payment is due. Clear your balance in full within this time and you usually won’t be charged a penny of interest – providing you haven’t used the card to withdraw money from a cash machine. Carry some of your balance over this date and you’ll pay interest on the whole balance – not just the sum you have outstanding.

Check with your credit card provider how long your interest-free period lasts. It’s usually up to around 56 days – depending on when in the month you made your transactions - which is time for you to receive your bill for the month and then pay it by the due date.

Some credit card providers offer a longer 0% interest period as part of an introductory offer or promotional deal. This can be useful if you’re planning to use the credit card to consolidate your debts or make a larger purchase and you want to spread the payments without spending too much on interest. However, it’s wise to always clear as much of your balance as you can. That way you’ll keep the interest you’re charged when the promotional deal ends to a minimum - and it’s also just a good habit to get into.

“As long as you pay your full balance within this window you can make purchases with your credit card without paying interest on them...”

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How can I benefit from an interest-free period?

Interest-free periods mean it’s possible to spend on a credit card for free – as long as you clear your balance in full within this time. Not only is this good news for your wallet, but it’s also good news for your credit history (more on that later).

The key rule to follow when you have a credit card is always make at least the minimum repayment on time every month. Miss this and any promotional offers you have could be terminated, you could be charged by your lender and your credit history will be damaged.

We really can’t stress enough how important it is to make your minimum payment each month. So you don’t have to worry about remembering when it’s due, set up a Direct Debit to clear the minimum payment each month. That way, you won’t run the risk of being hit with extra charges by your card provider.

However, you should do your best to make more than the minimum repayment each month. The great thing about an interest-free period is that as long as you pay your full balance within this window you can make purchases with your credit card without paying interest on them – which can save you a tidy sum. But, as we said earlier, if any of your balance is outstanding once your interest-free grace period has ended, you will pay interest on your entire month’s spending. 

And making your credit card as affordable as possible isn’t the only reason to clear as much of your balance as you can.

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How your credit history can benefit

Every line of credit available to you shows up on your credit history, which also contains information about your finances going back over the last six years. When you apply for new credit, lenders look at your credit history to see how you manage the credit you currently have available to you.

Making at least the minimum repayment each month on your credit card can have a positive effect on your credit history as it shows you’re able to keep on top of your borrowing. Lenders looking at your credit history can see that you’re able to manage your borrowing responsibly.

Missing your minimum repayment, or making it late, has the opposite effect. Lenders that look at your credit history can see that you’re struggling to manage the credit you already have – or that you’ve struggled in the past – and may worry that you’ll have trouble managing any further money they lend to you too. As a result, they may not offer you the deal you’ve applied for or could even turn your application down altogether.

To find out what types of credit card offer interest-free periods and the important things you need to remember, read part 2 of our guide.

Know if you're accepted before you apply with QuickCheck

  • Get credit - up to £1,500
  • QuickCheck won’t affect your credit rating
  • Get a fast response in 60 seconds

34.9% APR Representative (variable)
Intelligent Lending Ltd (Credit Broker). Capital One is the exclusive lender

Check Now