Caught out by ‘interest free’

In reality, most credit card purchases don’t qualify for the 55-day exemption

NAME: Doug Hardy

STATUS: Using credit card to pay for renovations to the family home.

QUESTIONS: Can you explain how 55-day interest-free credit cards work? Is there a genuine 55-day interest-free card that allows you to pay interest only on what you owe? What is the best rewards card with benefits for my family?

ANSWERS: Realistically a 55-day interestfree credit card does not exist. To get it, you would need to do all your spending on the very first day of your billing cycle (30 days plus 25 days to pay the bill). If you want to forgo home delivery from Coles in lieu of home improvements or purchase of whitegoods, consider the HSBC Low Rate Credit Card, which charges an interest rate of 13.25%pa with up to 60 days interest-free.

Doug is renovating his house and using his Coles Mastercard to pay for most materials to take advantage of the card’s 55-day interest-free feature. “We have always been diligent in having it paid it off in full but due to some recent financial changes we had a balance owing,” says Doug.

What he discovered was how the card’s interest-free feature really worked: the 55 days is based on the monthly billing cycle and isn’t 55 days on every purchase.

“I expected the nearly 20% interest to be charged on the ‘old debt’ which I found on the recent statement to be around $15. What I didn’t expect was the $45 interest charges on all transactions during the month starting from day one,” he says.

When he called Coles and spoke to its credit card division, he was told that if there is any outstanding balance of even 1¢, then interest is payable immediately, not after 55 days.

Also he discovered there is a delay of four business days in transferring funds and making payments on the credit card. “It would be nice if that could happen on the same day or next business day like most other things,” says Doug.

He wants to switch credit cards. But which is the best – Mastercard or Visa – for his family? He would like one with points accumulation and a lower interest rate. Also he does value the free home delivery of orders from Coles, which comes in handy for his young family. “We would like to actually have 55 days interest-free as we used to with our bank,” says Doug.

He says he did have a better card but switched to Coles. “Is Coles alone in this or have times changed so much that this is standard practice for all financial services providers these days?”