Interest free periods

tbo127

How do interest free periods work?  

Most say you have 56 days interest free from the date of purchase. Does this
mean 56 days from the date of each purchase or does it mean 56 days from the first purchase made after your previous credit was cleared?  

[Deleted User]

Neither.

It means if you make a purchase at the beginning of a new statement cycle, you'll have 56 days until payment will be due. So the period will vary from about 26 - 56 days, depending on when you make the transaction.

eskbanker

tbo127 said:

Most say you have 56 days interest free from the date of purchase.

Most say you have up to 56 days interest free, an important distinction, as explained above....

tbo127

Deleted_User said:

Neither.

It means if you make a purchase at the beginning of a new statement cycle, you'll have 56 days until payment will be due. So the period will vary from about 26 - 56 days, depending on when you make the transaction.

So in this case, if you make 2 purchases during billing period 1 and another 2 purchases during billing period 2 and you pay off the total of billing period 1 after you’ve made the 4 purchases, will the 2 purchases from billing period 2 be interest free until the start of billing period 3? 

[Deleted User]

Almost.  They won't need to be paid until the payment due date of billing period 2.

Ebe_Scrooge

Perhaps an illustration may help.  To keep things simple, let's suppose your billing cycle begins on the 1st of the month, and the statement is produced on the 30th.  You make a purchase on the 1st March.  This appears on the statement produced on 30th March, and the "payment due date" for that statement is 26th April.  As long as you pay in full by 26th April, you'll have had 56 days of interest free credit for that purchase you made on 1st March.

Buy something on 28th March, it'll still appear on the statement generated on 30th March, and will still need paying by 26th April.  So here you'll have only had 28 day of interest-free credit.

Buy something on 10th April (i.e. after you've received March's statement, but before it needs to be paid), this will appear on the statement produced on 30th April, and will need paying by 26th May.

Hopefully this may help to clarify.  Obviously, the actual date that your statement is produced will be different for everyone (depends when you opened the account), but the principle is the same.

phillw

Purchases made in a billing period will be interest free until the payment is due, as long as you cleared the balance of the previous billing statement when it was due.

So if you buy something in march and miss the payment due date on the statement it appeared on, then you will pay interest on it from the date the purchase was made along with interest on any purchases in april from when they were made.

This causes some issues when coming to the end of a 0% purchases deal as any purchases made in the final month won't get any interest free period at all. If you only paid the minimum payment and then pay off the remainder on the final day.

tbo127

phillw said:

Purchases made in a billing period will be interest free until the payment is due, as long as you cleared the balance of the previous billing statement when it was due.

So if you buy something in march and miss the payment due date on the statement it appeared on, then you will pay interest on it from the date the purchase was made along with interest on any purchases in april from when they were made.

This causes some issues when coming to the end of a 0% purchases deal as any purchases made in the final month won't get any interest free period at all. If you only paid the minimum payment and then pay off the remainder on the final day.

So basically you need to clear your credit at the end of every billing period by the payment due date. Otherwise interest gets charged on all outstanding credit regardless of which billing period it’s from? 

Ebe_Scrooge

tbo127 said:

phillw said:

Purchases made in a billing period will be interest free until the payment is due, as long as you cleared the balance of the previous billing statement when it was due.

So if you buy something in march and miss the payment due date on the statement it appeared on, then you will pay interest on it from the date the purchase was made along with interest on any purchases in april from when they were made.

This causes some issues when coming to the end of a 0% purchases deal as any purchases made in the final month won't get any interest free period at all. If you only paid the minimum payment and then pay off the remainder on the final day.

So basically you need to clear your credit at the end of every billing period by the payment due date. Otherwise interest gets charged on all outstanding credit regardless of which billing period it’s from? 

Correct.  There's no real need to overthink things - just pay each statement in full when it arrives (well, before the "payment due" date, which is typically 3 weeks or so after you receive it), and there'll be no interest charged.

One point to bear in mind, and which catches a lot of people out.  If you fail to pay the full statement balance, you'll be charged interest on the full amount.  For instance, if the statement arrives and it's got £100 in total on it.  If you pay £99, then you'll be charged interest on the full statement balance of £100 - not just the £1 that's left over.