Is > 45 day interest free really just a sham?

[zzyss]

I've been thinking about this. With most credit cards, they require you to pay the full closing balance with each statement. So if they issue monthly statements, then even if you paid for something 1 day after the statement was issued, then add 1 month interest free, plus the 14 days that they give you to pay your statement, that's 45 days.

So what's the big idea flogging 55 or even 60 days interest free?

 

[Mal]

Credit cards only ever require you to pay the minimum payment amount, which may be somewhere between 3% and 5% based on the card.

The various days free stuff is all about when the billing cycle closes, and what date you're required to pay the full $ due without paying interest.

Generally the later ones are better - assuming you do pay off your credit card, and don't just pay off the minimum payment required.

 

[oz_mark]

I've been thinking about this. With most credit cards, they require you to pay the full closing balance with each statement. So if they issue monthly statements, then even if you paid for something 1 day after the statement was issued, then add 1 month interest free, plus the 14 days that they give you to pay your statement, that's 45 days.

So what's the big idea flogging 55 or even 60 days interest free?

Some accounts require payment 25 days after statement date - which gives you the 55 days.

The Source mastercard is due one month after statement date, which gives you the 60 days.

 

[Alanslegal]

Here is an example of my Citibank Gold "free for life" card;-

My last statement date is 8 March 2009 (from 9 February 2009). The payment due date is 2 April 2009, that is 25 or 26 days granted depending on how you calculate it.

If I made a purchase say on 9 March 2009, theoretically I would get up to the next statement date, say 8 April 2009, and that purchase has to be paid in full by say 2 May 2009. Hence I get a free interest day period of 9 March 2009 through to 2 May 2009 being 55 days free.

So the larger than 45 days interest free, isn't a scam at all.

In fact I try to use the maximum free days and will make purchases around the start of the new cycle. I have even delayed payments of bills (and is deliberately late) so not only do I get the free days from the bill itself, I also get an additional 55 days meaning more time those funds are sitting in my mortgage offset account!

 

[somebol]

Typically from the first day of you billing cycle to you bill due date should be the max number of interest free days 45, 55 etc. Only purchases made on that day receive the full benefit of 45+ days interest free.

 

[JohnK]

Amex is another example of 55 days. My statement ends on the 5th of the month and the payment is due on the 29th of the month. So if I purchased something 1 day after the statement was issued I would theoretically have 55 days interest free.

Unfortunately if you are a revolver like me then interest fee periods mean absolutely nothing as I pay interest immediately the transaction hits the account. I would rather have a lower interest rate to help offset some of the interest paid but the credit card interest rates have remained steady for existing accounts even though home loan interest rates have dropped >3%....

 

[vilemerchant]

Amex is another example of 55 days. My statement ends on the 5th of the month and the payment is due on the 29th of the month. So if I purchased something 1 day after the statement was issued I would theoretically have 55 days interest free.

Unfortunately if you are a revolver like me then interest fee periods mean absolutely nothing as I pay interest immediately the transaction hits the account. I would rather have a lower interest rate to help offset some of the interest paid but the credit card interest rates have remained steady for existing accounts even though home loan interest rates have dropped >3%....

Hey John.

I have a debt card as well which i'm revolving, but I also have a rewards card which I use for expenses and pay off in full every month. It's helpfull to do it this way so that at least some of my debt is interest free every month and it also gives me the one month buffer. You'll save a lot in interest by having at least one card you can pay-in-full.

Sorry don't mean to sound like a wanker

 

[JohnK]

No offence taken. I think it is actually good advice but for now I am trying not to apply for anymore credit cards and want to get rid of some of the ones I have so I can get some breathing space....

 

[drron]

Well with my Citibank fee paying platinum card the original closing date was the 3rd of the month and I got until the 2nd of the next month to pay.My card has been replaced twice by citibank as it was "compromised".So now the closing date is the 18th of the month and I have to pay by the 31st.
So seeing a fee free card issued by citibank gets a longer time to pay they have now made sure of losing 1 fee for this year.