Credit cards come with an interest rate. But just because you could pay interest doesn’t mean you have to pay a lot of it. Find out ways to reducing how much interest you’ll need to pay.

Give me the main points

  • A credit card is essentially a flexible loan, so you’ll pay interest on it.
  • You can drastically reduce your interest by paying off your closing balance each month.
  • You may not be getting your full amount of interest-free days. Be sure to understand what ‘up to’ means.
  • Cash advances are sometimes necessary, but should be avoided if you don’t want to pay too much interest.
  • Don’t get confused about special rates. It’s less to do with when you purchase something and more to do with when we charge interest.

Understanding credit cards

What is a credit card? The official term is ‘revolving line of credit’. In normal speak it’s a card with a set amount of funds (called a limit’) you can borrow at any time.

That’s the important word: borrowed. Like other loans, credit cards also come with an interest rate.

They have a regular repayment cycle, so the amount of interest you’ll pay will differ each month. It’s determined by how much you spend, how much you repay, and when you repay it.

There are ways to reduce how much interest you’ll pay.

Paying off your closing balance

The easiest way to avoid interest is to pay off your closing balance before your statement’s due date. Credit cards come with "up-to-44 days" or "up-to-55 days" interest-free on purchases. Interest to pay doesn’t start to build up until after the statement due date. But more on this later.

Perhaps you’re forgetful. If you don’t think you’ll remember to pay before the due date, set up a direct debit to pay it in full for you each month. If you’d still prefer to pay it manually, you can set up a payment reminder which will, you guessed it, remind you to pay it.

Using interest-free days

Our cards will say either “up to 44 days” or “up to 55 days” interest-free. But, be wary. It doesn’t mean you get 44 or 55 days interest-free from the moment you buy something. The "44/55 days" refers to from the start of your statement cycle to your statement’s due date. This is what we mean by "up to".

So you could get between a week interest-free or a maximum of 44 or 55 days.

We talked about paying your closing balance in full. Remember if you don't pay it in full each month, you don’t get your interest-free period.

Unpaid balance transfers mean no interest-free days

If you haven’t repaid a balance transfer, all other purchases will earn interest immediately. There are no interest-free days.

Only once you've repaid a balance transfer will your interest-free days resume normally.

Making a cash advance

A standard cash advance is withdrawing cash from your credit card. Because this isn't considered a purchase, interest-free days don’t apply. This means interest starts to add up from the moment you make the withdrawal.

Cash advances should be a last resort or in case of an emergency. If you need cash, you need cash. But be sure to repay it as soon as you can to save on interest.

Other cash advance examples:

  • Cash out from your credit card account at an ATM, or over the counter.
  • Money transferred out of your credit card and into another account.
  • Using your credit card for gambling purposes.
  • Bills paid with your credit card over the counter at another bank or at a post office. Online bill payments are usually okay, but check with your biller first.
  • Things bought that work more or less like cash, like traveller’s cheques or gift cards.

Enjoying special rates

Special rates for purchases end. And the end date isn’t the last day you can make purchases at a special rate. It's the last day we’ll charge you the special rate.

For example. If a special rate ends 31 December, your closing balance will accrue higher interest from January 1. This is regardless of any purchases before December 31.

Important information

Credit cards issued by National Australia Bank Limited. © 2016 National Australia Bank Limited ABN 12 004 044 937 AFSL and Australian Credit Licence 230686

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