Swipe Smart, Make The 'Free Credit Period' Count
DSIJ Intelligence / 19 Nov 2013
Free credit period is one of the first points that are highlighted when a bank is selling you a credit card. Learn how to use this privilege to your advantage.
Credit cards form an important and an integral part of your personal finance. Of course, they come with their own set of pros & cons. We have already looked into one of the cons of the credit cards, i.e. the pitfall of the Minimum Amount Due. Now, let us look at one of the most attractive propositions that credit card companies offer. This is the free credit period that many of the credit cards available in the market offer to their customers.
Free credit period is one of the points that are highlighted when a person is offered a credit card by any bank. This period varies from 20-50 days, and is totally at the discretion of the issuing bank.
So, what really is the free credit period? This is the duration in which the issuing bank does not charge the cardholder any interest. After this period, payment has to be made on purchases made against the credit card. If full payment for the outstanding amount is not made at this point, the member loses the privilege of free credit from that date onwards until such time as the payment is not cleared.
Availing yourself of this facility in a planned manner will entitle you to interest-free loan upto a maximum limit of 50 days depending on the bank and the offer made to the customer. Remember that credit cards typically have a one-month billing cycle, and customers usually get around 20 days to pay the bill. If you pay the entire bill by the due date, no interest is charged on the credit. So, if you follow the time of purchase as per the table and buy at the beginning of the cycle, the charges will appear only in the next month's bill. Utilising this feature of your credit card will save you on interest costs. What this effectively means is that you could get upto 50 days of interest-free credit (or free money!). This is an especially useful option when you have more than one credit card in your name, each having different billing cycles.
| Day of Month | ||||
|---|---|---|---|---|
| Bill Date | Due Date | Ideal Card Usage Period | Free Money Period | |
| Card 1 | 5th | 25th | 5th & 15th | Approx 40-50 days |
| Card 2 | 15th | 5th | 15th & 25th | |
| Card 3 | 25th | 15th | 25th & 5th | |
Of course, don't lose sight of the fact that you need to clear all the dues before the due date. If any amount remains unpaid and the billing period starts with a balance, you forfeit the option of getting interest-free credit on new purchases.
Hence, like all good things, this too is a good option if you use it well.
Glossary:
Bill Date: This is the date on which your credit card bill gets generated for the spending done in the previous month.
Due Date: This is the date by which you have to either clear all the dues or at least pay the minimum amount due on your credit card.
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