Credit cards offer a convenient solution by providing additional credit during times of need. However, the primary concern faced by users is credit card interest rates. One of the most prominent features of credit cards is the associated interest-free period. This article gives a detailed overview of the guidelines that one must follow to use the interest-free period smartly.

Interest-free period on credit cards – An overview

A credit card’s interest-free period encompasses the timeframe between the end of a billing cycle to the payment due date. This timeframe is referred to as a “grace period” and can vary across lending institutions. The interest-free period typically extends through the start of the statement period until 15-25 days after the last day of the statement period. This timeframe varies between 45-55 days, depending upon specific billing cycles. Individuals may seek to apply for a credit card with no annual fee in India. However, utilising the interest-free period efficiently can be far more effective than using such cards.

Working through an example

Let us understand how the interest-free period is used in different scenarios.

Scenario #1: No previous outstanding balance

Suppose you made a transaction of Rs. 20,000 on January 10th and a subsequent transaction of Rs. 10,000 on January 15th. Therefore, your cumulative bill on February 1st amounts to Rs. 30,000. You can pay this amount in full or 5% of the total amount (which amounts to Rs 1,500) by the due date set for February 20th. If you make the full payment, no interest is charged. However, if you paid the minimum outstanding amount, the interest gets levied on the remaining balance, which is Rs. 28,500. Assuming the interest rate is 4%, an outstanding balance of Rs. 29,640 gets piled onto your next month’s credit card bill.

Scenario #2: Holding a previous outstanding balance

Suppose you have a previous outstanding balance of Rs. 10,000. You make purchases worth Rs. 20,000 on January 10th and Rs. 10,000 on January 15th. Your credit card bill as of February 1st is Rs. 40,000. You can pay this amount in full or 5% of it, amounting to Rs. 2,000, by the due date of February 20th. If you make the full payment, no interest is charged. However, if you pay the minimum amount due, an interest gets levied on Rs. 38,000. Assuming the interest rate is 4%, an outstanding balance of Rs. 39,520 gets accumulated to the next month’s bill.

Using credit card interest-free periods smartly

The interest-free benefits are available only to individuals who regularly pay their credit card bills. If customers make delayed payments, they are liable to pay additional finance, and the grace period no longer applies. There are multiple ways which enable you can use the interest-free period efficiently.

1. Follow a planned approach

The key to utilising your interest-rate period efficiently is to start early. Utilise the beginning of your credit card period to start making purchases. You may begin your purchases early and continue until your bill gets generated. It facilitates a more extended repayment period, which remains interest-free since your credit card bill would get generated on a particular day of the month.

2. Efficient payments

Ensure paying the closing balance in full before the assigned due date to retain an interest-free period in the next statement cycle while avoiding interest charges. You may set up reminders to ensure the timely payment of your entire closing balance. Additionally, timely payments of your credit card bills help enhance your credit score. A good credit score is a critical determinant in loan application approvals. Making timely payments, therefore, serves numerous purposes.

3. Use multiple credit cards

You can maximise the benefits of an interest-free period by holding various credit cards. However, you must ensure all the credit cards have different billing cycles. The most efficient way of managing multiple credit cards is to make timely payments on each one of them. Individuals are often reluctant to purchase more than one credit card because they believe holding multiple credit cards may hamper their credit score. However, this is not true. Having more than one credit card may not impact your credit score, but defaulting does. Individuals must ensure they manage their payment schedules effectively.

4. Stay ahead of your payment due date

Suppose you make the bill payment on the last day by depositing a cheque. However, it may still take a couple of days for the amount to get credited to the lender’s account. The payment status is cleared only after the lender receives the outstanding amount.


Credit cards are an excellent source to finance daily personal needs. The interest-free period is an excellent feature associated with credit cards. You must work through extracting the utmost benefits out of this feature to incur maximum gains.

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