18 Nov 2015

Pratik Bhartia

Free credit period on your credit card

One of the big advantages that you have when spending on a credit card is the free credit period offered by the banks. It essentially is a buy now pay later scheme with no cost attached. The free credit period can vary from anywhere between 15 – 50 days depending on the date of purchase and the billing cycle of the particular card.

Knowing the billing cycle of your card and planning your purchase can help maximise the utilization of this free credit period, and hence save you more money. Lets understand this better:

The payment due date for your credit card bill is typically 15-20 days from the date the bill is raised. Now, lets assume your billing date is 20th of the month. If you make a purchase on the 19th of the month on this credit card, it will get billed on the 20th, and you will have to make the payment by 5th of the next month (assuming 15 days payment period). Now, lets say you are a smart cookie and your date of purchase is flexible. So you defer the purchase decision by 2 days, and buy on 21st, right after the billing date, the spend will actually get billed on 20th of the next month (which is after 30 days). Once the bill is raised, you will have another 15 days to make the paymment. This now give you a free credit period of 45 days!! This is the time that money is earning additional interest in you bank.

The same principle can be applied if you have 2 or more credit card. Try and move your spends to cards which are farthest away from the billing cycle to get the maxium time before you need to make a payment. Do this smartly and you can save enough on interest etc to earn yourself a treat!

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