Credit cards typically charge interest, so it's a good idea to understand what it is and how it works so you help minimise the amount of interest you'll need to pay.

Understanding credit cards

Ever wondered what a credit card actually ‘is’? The official term is ‘revolving line of credit’, which means it’s a card with a set amount of funds (called a limit) you can borrow at any time.

The key word? Borrowed. And just like other loans, credit cards come with an interest rate. They also come with a regular repayment cycle, so the amount of interest you’ll pay usually changes each month.

The bottom line is the amount of interest you need to pay is determined by how much you spend, how much you repay, and when you repay it.

But if you’re smart, there are ways to reduce how much interest you’ll pay.

Paying off your closing balance

The best way to 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 build up until after the statement due date.

If you think you’re likely to forget to make manual payments, why not set up a direct debit in Internet Banking or the NAB app to pay it in full each month? If you’d still prefer to pay it manually, you can set up a payment reminder as a prompt. Find out more about NAB Alerts.

Using interest-free days

Our cards will say either “up to 44 days” or “up to 55 days” interest-free. But to be clear, it doesn’t mean you get 44 or 55 days interest-free from the moment you buy something. The "44/55 days" is 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. But remember, if you don't pay it in full each month, you don’t get that 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, leaving you with no interest-free days. You can make sure that this goes back to normal by repaying your balance transfer in full.

Read more about how to use an interest-free period.

Making a cash advance

A standard cash advance is withdrawing cash from your credit card. But since 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, it’s a way to get it if you’re stuck. But remember, the interest for cash is usually quite high, so pay it back as soon as possible.

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
  • 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 1 January. This is regardless of any purchases before 31 December.

Important information

Credit cards issued by National Australia Bank Limited. © 2018 National Australia Bank Limited ABN 12 004 044 937 AFSL and Australian Credit Licence 230686

The information contained in this article is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, NAB recommends that you consider whether it is appropriate for your circumstances. NAB recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.

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