Take an interest in free days

CREDIT card interest rates continue to sting customers as many remain unclear on how to optimise their interest-free periods.

While banks are showing no signs of dropping their rates on plastic, latest findings from financial comparison website Finder.com.au shows card users can enjoy interest-free periods as long as nine weeks before charges kick in.

The site’s database found interest-free periods on cards range anywhere from 44 days up to 62 days.

A majority of cards (about 70 per cent) available have 55-day interest-free periods so it pays to choose your card carefully to make sure you get as many interest-free days as possible. However, once interest charges do kick in, rates hit hard at an average of 17 per cent.

Finder.com.au spokeswoman Bessie Hassan says card users need to know the ins and outs of their interest-free period to ensure they use it to their advantage.

“Try and pay your account’s outstanding balance in full before each due date and you’ll avoid getting stung by accruing interest,’’ she says.

“If you don’t pay in full by the due date you’re also likely to lose the interest-free status for that billing cycle as well as the next one because the amount due will carry into your next bill.”

Every credit card has a different due date, so it’s critical consumers pay attention to this and know when their interest-free cycle starts and ends.

If you are making a larger purchase that will take you some time to pay off, try and do it early into your interest-free period as it will give you more time to pay it off.

AMP financial planner Mark Borg says it pays to look at all charges associated with a card, and not just focus on the interest-free days.

“The first thing you can do before you grab a card is to know the annual fee because many of the cards have charges around $150,’’ he says.

“Many institutions also allow for direct debits so you can tick a box and at the end of each month so you know your account will always be paid off in full.”