How does the interest-free period on your credit card work?

How does the interest-free period on your credit card work?There is a great deal of confusion over how the interest-free period works on your credit card. While credit cards advertise 55 days interest free, that is the maximum interest-free period you can get, and it all depends on how you use your card. About 85% of card holders get zero days interest free.

Listen to Maya and Mapalo Makhu discussing this and other stories on the My Money My Lifestyle podcast.

The first thing you should know is that if you don’t pay your card in full on due date, interest is charged from the date of purchase. You effectively lose the benefit of that interest-free period. Considering that only 15% of South Africans pay their credit cards in full each month, most never even benefit from the interest saving.

You also need to keep in mind the dates of your credit card billing cycle. You’ll only get the full 55 interest-free days on purchases made the day after your billing cycle closes.

An example

1 – 31 March is your card’s billing period. Any amounts spent during this period are free of interest if you pay the full amount owing (purchases between these dates) by 24 April.

In other words, if you make a purchase on 1 March you effectively have until 24 April to pay for it – 55 days witout any interest being charged. But if you make the purchase on 31 March, you only get 24 days interest free. If you have a credit card charge on 1 April this will fall into the next billing cycle payable on 24 May.

So, if you want to make a big purchase and benefit from the full interest-free period, make sure you understand your billing cut-off date. You want to make the purchase on the first day of the new cycle. Also make sure you pay it off in full on payment date – otherwise you pay interest right back to day one.

Some transactions immediately incur interest

The following transactions do not qualify for any interest-free period and incur charges from day one:

  • Cash withdrawals from your credit card
  • Gambling charges
  • Transferring amounts from your credit card to another credit card or bank account.

This article first appeared in City Press.

6 CommentsLeave a comment

  • Hi there
    If I make a R15000 purchase on the first day of by billing cycle, and over the next 55 days pay off R10000 of that, when the 55 day period is over, will I be charged interest on the outstanding R5000, or the entire R15000?

    Seperately, is interest generally charged on a transaction by transaction basis? So each transaction is tracked for the amount of days outstanding, and interest totals are added up and applied to your account monthly? Many thanks

  • Good Evening Maya, I am actually looking for the video that you did earlier this year about “good'” credit card use’. That was so informative! I cannot remember the exact date but it was on eNCA. I have checked on your video collage but I could not find it. Please share the link if that would be possible maám.


  • Hi Maya,

    Thanks for writing this piece. It seems that fuel transactions also incur interest immediately. What have you heard about this?

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