An interest-free period or also known as a grace period is the time frame between the transaction date and the due of the card payment. This interest-free period can range from 20 days to 50 days differing from card to card and their providers. If you make a payment on or within this particular time frame, there is no interest charged on the amount.
A brief explanation of the Interest-Free Period:
- This period is beneficial for those users who struggle in making timely payments; however, in the last few days, the cardholder must settle their bill by the due date to avoid any interest on the payment. Cards.
- Any money withdrawal with the help of a credit card will be charged with interest till the balance is fully cleared by the card bearer. Simply stating the withdrawal of cash will not have any grace period.
- Unpaid balances from previous billing cycles will counter to no grace periods. And if you fail to pay the balance on or before the due date, you are entitled of getting charged an interest rate on the whole amount as well as the new purchases made.
Read More: How To Use Credit Card Interest-Free Period Wisely
Important Dates to keep in mind for the interest-free period calculation to avoid the interest rates :
Statement Generation Date :
Every month you receive your credit card bill provided by your credit card providers. It has the overall details of all of your transactions, reward points, cash backs, due dates, etc.
Due Date :
The due date is the last date of your payment, so it is advised to make the payment by this date or before that to avoid any charges.
Grace Days :
Some Best Low-Interest Credit Cards provider provides grace days even beyond your due date and if you skip your due date but still pay within your grace day, you will not face any interest rates.
Every Financial institution has different terms and conditions for every type of card they provide. Grace days are one of those terms. This time of interest-free payment can differ from card to card and person to person.
Grace days are one of the unwritten standard benefits that almost every bank follows. However, the days can differ. As stated earlier the grace days or interest-free period can start from anywhere 20 days and end at 50 days and the days allotted to you for your credit card are different.
For Example :
If you are allotted 45 days grace period or an interest-free period, then they can make the payment before or till this day from the day of purchase.
Suppose you purchased 2 of Jan then your bill will be due on 1 of Feb but you have 45 days as your grace period then you can still make the payment till 16 Feb since you will not be charged for any interest. However, if you make the payment any later than that or do not make any, then you are liable to pay the interest rate on the amount.
When is interest charged on credit cards?
If you pay the total amount due on your credit card before the due date of the payment, there will be no interest charges applied for the same. But if there are some scenarios where you are liable to pay the interest rates, which are :
Scenario 1: No credit card payment is made – This happens when you entirely skip your card payment, bank will start charging the rates on the total due amount as well as on the new transactions from the transaction date till the whole previous amount has been paid in full.
Scenario 2: Minimum amount paid – When you pay only a minimum amount due, interests are charged on the remaining amount as well as the new purchases till the previous due has been cleared.
Scenario 3: When you pay less than the minimum amount due – If you pay less than your minimum due amount due, the entire outstanding balance will be charged with the interest rates along with new transactions until the previous dues are cleared.
Scenario 4: Withdrawal of Cash – When you withdraw cash, you get the cash advance facility and it attracts the interest rate on the amount withdrawn until the whole balance is paid.
Scenario 5: Carry forward the outstanding – When you carry forward your outstanding balance from the previous installment or payment in full then the whole balance will be subject to the interest along with new transactions unless the previous balance has been paid in full.
Grace days play a very important role in planning out the EMIs and the interest rates on your account. These dates can impact the ratio of High-interest credit cards rate on every purchase. Although low-Interest credit cards do not have extra high rates there are still additional charges so play smartly.