Understanding how your credit card interest is charged could help you avoid paying unnecessary interest or reduce the amount of interest you pay, as well as helping you make the most of your interest free period.

Paying off your 'closing balance'

The best way to avoid credit card interest is to pay off your closing balance before your statement’s due date, or if you have a balance transfer, the interest free days payment shown on your statement. 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.

Know your interest-free period

Most of our credit cards have an interest-free period and will say either “up to 44 days” or “up to 55 days” interest-free. To be clear, this doesn’t mean you get 44 or 55 days interest-free from the moment you buy something. The 44 or 55 days begins at the start of your statement period and ends at your statement due date. This is what we mean by "up to".

For example, if the statement period begins on July 5, this is also the date that the 44 days interest-free period begins. If the statement period ends on August 3, you then have 14 days, ending on August 17, as your ‘payment window’ to make a payment. To avoid paying interest in this example, you would need to pay off the entire closing balance by August 17.

  • If you don’t pay the full closing balance by your due date, you’ll be charged interest from the day after the due date. This interest is charged against everything you’ve purchased during the statement period, minus any payments you’ve made.

  • Note that payments like BPAY and transfers from non-NAB accounts may take a few days to process.

Remember not all transactions have Interest free periods

Examples of transactions that don’t have an interest-free period include:

  • cash advances: these are cash withdrawals made from your credit card account
  • gambling transactions (these are considered cash advances)
  • purchasing traveller’s cheques or gift cards
  • buying or loading value onto a prepaid or store-value card.

Avoid cash advances if possible

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 charged for cash is usually quite high, so try to pay it back as soon as possible.

Other cash advance examples include:

  • 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 you should check with your biller first)
  • traveller’s cheques or gift cards.

Pay attention to 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.

Reduce your balance whenever possible

If you can control and reduce your credit card balance, you'll end up paying less interest in the long run. Find out more about managing your credit card balance.

Looking to switch credit cards? Compare features and offers of all our credit cards.

Important information

Credit cards issued by National Australia Bank Limited. © 2020 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.