Credit cards: What is 45-day interest-free period and how to make the most of it?

If you have just started using a credit card, it is understandable to be tempted to use it for a range of expenses. And as you use the card for anything—ranging from making a bill payment to buying merchandise—you will be entitled to a 45-day interest-free period. During this moratorium of sorts, you are not charged any interest on your credit card dues.

However, once this period ends, interest, which could be as high as 2-3 per cent per month, starts to accumulate. What not many people know is that interest begins to accrue not only from the day the interest-free period ends but also from the date of the transaction.

So, it is advisable to clear the credit card bill as soon as possible to avoid incurring additional interest on the unpaid bill.

What is an interest-free period?

When you use your credit card, the card company or the bank offers a 45-day interest-free period during which no interest is payable to the bank. This period can be short or long based on the tenure between the date of the transaction and the due date of the bill.

Here is an example

Let us suppose that your credit card's billing cycle is from April 1 to April 30, and the due date to make the payment is May 15. If you make a transaction on April 1, you can avail the interest-free period of 45 days to clear your bill by May 15.

On the other hand, if you use your card on April 30, you will be entitled to a shorter interest-free period of 15 days for this particular transaction. So, the length of the interest-free period depends on two factors: the date of the transaction and the due date of the bill.

All the transactions carried out between April 1 and April 30 are put together and added to the final bill sent to you on May 15.

As mentioned above, if you make the part payment of your bill for a transaction made on April 1, the interest will start from April 1 and not from May 15.

(Note: Using a credit card carries its own set of risks)