Interest Free Period - What does it mean

patwa_2

I've been thinking about taking out a MBNA Business Credit Card for Sole Traders but am a bit confused about one of their 'benefits'.

Up to 57 days interest free on card purchases when you pay your statement balance in full and on time every month.

I know about the traditional interest free period (e.g 0% interest on purchases for nine months) whereby you don't get charged interest if you don't pay your bill by the due date for that period of time.

But doesn't the condition quoted above sort of cancel itself out? If you're supposed to pay your bill in full by the due date, then why would anyone need the interest free period? Only if one could not pay their bill on time would they want a period where they could pay off the bill without being charged interest, surely?

Any clarification would be appreciated.

Hussein.

Robert_Sterling

In general when you buy something using a credit card you are only asked once a month to make a payment and when you are asked to pay you do not have to pay immediately. As a result of this if you buy any item you may not have to pay for it for UP TO about 57 days.

The credit card terms and conditions explain what happens in general.

If you take up a special offer then some of the general terms and conditions are put in abeyance for a period which might be up to about a year.

So if you have a no interest to pay for nine months for example then the "57 days interest free" is rendered nugatory by the 9 months free interest condition. The normal interest free period for purchases is reinstituted after the 9 month period has elapsed.

patwa_2

Thanks. This makes some sense to me now. I'll think about whether to go for the card over the weekend and decide on Monday

Cheers and take care.

Hussein.

Milarky

Remember that if you don't pay the bill 'in full and on time' (underpaying by as little as 1p or paying late by a single day) then you get charged interest from the date of the transaction - not simply from the end of the interest-free period onwards. You could repay at any time up to the last date of course, and some people still do this, but with direct debits that take the full balance on the 'due date' itself people have been able to take fulll advantage of this 'loophole' of credit cards for a number of years. In doing this, and coming to rely on it being there, we tend to forget just that - that is is 'loophole' and not a 'given' in the world of finances.

patwa_2

Thanks.

I'm going to have to phone Natwest tomorrow. My satement shows two 'Payment Received' but not even the full statement shows where the payments were received from, and now my card has been overpaid by £63,00. I dont believe it's me as I'm not in the habit of overpaying. Also I need to know if the excess can be transferred to my bank account and if so how much it will cost. I don't like to leave extra money on the card as that's less spending money for me day-to-day without the card.

Cheers and take care.

Hussein.