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Credit Card Interest-Free Periods Explained
A grace period is the time from the date of a purchase to the date your payment is due during which you won't be charged any interest on purchases—provided you pay your full balance on time each month. Eligibility for an interest-free period may also depend upon additional criteria, which will vary from card to card. Understanding how interest-free periods work can potentially save you hundreds of pounds in interest charges.
How Interest-Free Periods Work
Interest-free periods can either refer to a grace period or an extended 0% offer on purchases or balance transfers. In either case, during an interest-free period you won't be charged interest on your balances—but you will still need to make monthly payments that go towards reducing your outstanding balance.
Interest-Free Grace Periods
If you pay your full balance on time each month, you won't be charged any credit card interest—even though you might not pay back the credit card company for your purchase for nearly a month or two. This is called a grace period. Credit card issuers usually won't charge interest on purchases so long as cardholders consistently pay their bill in full and on time each month.
Grace periods usually last a maximum of 48 to 56 days from date of purchase, or 17 to 25 days after the end of a billing cycle. In most cases, in order to be eligible for an interest-free period you must pay your current month's balance in full by the due date AND must also have paid your previous month's balance in full by the due date.
When You Pay the Full Balance
By paying your credit card balance in full during the interest-free period (that is, before the due date), you can avoid interest charges on the most common transactions—purchases. Unless you have a valid promotional 0% offer, cash advances and balance transfers do not have interest-free periods, and instead accumulate interest immediately. The treatment of interest on cash withdrawals and balance transfers varies significantly from card to card.
Back to interest-free periods for purchases, let's say you make £1,000 of purchases during your March billing cycle (with no cash withdrawals or balance transfers). At the end of the billing cycle you receive a bill with a due date of 25 April. The period of time from your purchases until the 25 April due date (up to 56 days) is your interest-free period. If you pay the full £1,000 balance by 25 April (and, in most cases, also paid the previous bill in full and on time), you don't pay any interest on any of the purchases you made in March. You are usually also eligible to avoid paying interest on the next billing cycle, in this case April.
When You Carry a Balance
If you don't pay the full balance in any given billing cycle, you're typically not eligible for an interest-free period in that cycle and possibly the next cycle, too. Additionally, you'll be charged interest on the unpaid portions of your balance.
Interest-free period eligibility requirements vary from issuer to issuer but most will allow you to reinstate your interest-free period by paying your bill in full and on time for one or two consecutive periods. Your credit card agreement will detail the requirements for interest-free periods for your particular card. This information can often be found quickly on a card's Summary Box.
Example: Let's say you make £1,000 of purchases during a billing period lasting from 1 March until 31 March, and the payment is due on 25 April. If you pay off £700 of the balance by the due date, you not only have to pay interest on the £300 remaining balance until you pay it off, but you also have to pay interest on the £700 you have cleared for the period from the purchase date until the payment date—by not paying the full balance you are not eligible for an interest-free period. Plus you'll probably need to pay interest on new purchases in the subsequent billing cycle.
Top Tip: Pay the full balance on time each month to take advantage of grace periods and avoid interest charges.
Explaining the MAXIMUM Interest Free Period
The summary box of a credit card will tell you the maximum number of interest-free days, but how do you really know how many days of interest-free time you get on your purchases?
This maximum span of time includes two discrete time periods—the time from any purchase until statement closing date PLUS the time from statement closing date until the payment due date. The first part is variable and depends upon when in your billing cycle you make a purchase. The second part is fixed (and can be calculated as the maximum interest free period less 31 days), most frequently ranging from 17 to 25 days.
In the example of a 56-day max interest-free period, the fixed portion of the grace period would be 25 days (56 days - 31 days). Purchases receive an interest-free period of length equal to the variable (days remaining in billing cycle) plus fixed (25 days) portions. For purchases made on the last day of your billing cycle, you receive 25 days interest free (essentially the fixed portion only). For purchases made on the first day of your billing cycle, you receive the full 56 days interest free (the 25-day fixed portion plus 31 days left in the billing cycle). Hence, cards declare a maximum of 56 days interest free.
No-Interest Promotional Periods for Purchases and Balance Transfers
Many credit cards these days offer 0% interest promotional periods on purchases and/or balance transfers. Promotional periods can last anywhere from one month up to around 40 months. So long as you remain eligible for the promotion, you won't pay interest on these balances carried from month to month during the promotional period.
No interest doesn't mean no payments, however. You'll still owe a minimum monthly payment—this payment will go wholly to reduce your balance and won't include interest charges. Eligibility requirements vary by card, but typically you must pay at least the minimum payment on time and stay within your credit limit in order to keep the 0% promotional period.
Interest-Free Grace Periods by Credit Card Issuer
On average, the interest-free period for the UK credit card issuers we analyzed was a minimum of 23 days (from the statement closing date) up to a maximum of 54 days (from purchase date). In most cases, you'll be eligible for a grace period on purchases if you paid your full balance by the due date either EVERY month or in at least the past two consecutive billing cycles.
| Issuer | Minimum Interest-Free Grace Period (days) | Maximum Interest-Free Grace Period (days) |
|---|---|---|
| American Express | 25 | 56 |
| Aqua | 17 | 48 |
| Barclaycard | 25 | 56 |
| Capital One | 25 | 56 |
| HSBC | 25 | 56 |
| Halifax | 25 | 56 |
| Marbles review | 25 | 56 |
| Tesco | 20 | 51 |
| Vanquis | 25 | 56 |
| Virgin | 19 | 50 |
FAQs
For more information on credit card finance charges, please see our articles What is Credit Card APR, Average Credit Card Interest Rates and How to Understand Your Credit Card Bill.