How interest-free periods work

● Is 55 days interest-free really 55 days?

A predetermined interest-free period is a feature of most credit cards, with most banks offering you “up to” 55 days before your purchases start to incur interest. Absa and African Bank offer longer terms of up to 57 days and 62 days, respectively.

The interest-free period is commonly misunderstood by consumers, because it’s “up to” a set number of interest-free days. The number of interest-free days you score depends on when in the billing cycle you make your purchase.

Charl Nel, Capitec’s head of communications, explains how it works on a Capitec credit card, with which a customer can get the full 55 interestfree days but sometimes only 25 interest-free days.

“If you treat your family to lunch on 3 December and pay for it with your Capitec credit card, the amount will reflect on your December credit card statement, which is sent out on 25 December, but will only be payable at the end of January, when you receive your January credit card statement.

“Similarly, if you use your credit card for some last-minute shopping on 23 December, although this will reflect on your 25 December statement, it’s payable at the end of January when you receive your January statement.”

In the case of the lunch outing, you would get 55 days interest free, but with the December 23 purchase, you would get only 25 days interest free.

The key is to repay the full sum due to the bank as per the statement by the due date, not the minimum instalment. If you don’t, you’ll pay interest.

Some credit card statements are confusing. Capitec’s statement reflects as a line item the amount you need to pay “to avoid paying interest”.

To save interest accumulating on credit card purchases, Nel advises you to make all your card transactions “straight”, not budget. And remember, the interest-free period applies only to card-swipe transactions, not electronic fund transfers and cash withdrawals.