Defined Terms and Documents       

Interest Free Period means the number of interest free days from the date of a Purchase to when interest is charged on that Purchase if the total Total Amount Owing is not repaid.  There is no Interest Free Period on a Cash Advance.

Interest Free Period is known as the 'Grace Period' in the USA and Europe.  Diners Club and American Express' decision to provide a Grace Period as an inducement/lure when mass marketing their 'new fangled' Credit Cards in the early 1960's has proven to be a marketing 'master stroke'.

Interest on the Total Amount Owing is charged if a Cardholder does not pay their Total Amount Owing in full at the end of the one-month statement period.  As Cardholders generally have about 14 to 25 days from receipt of their monthly statement to pay their previous month's Total Amount Owing, this means there is usually an Interest Free Period of between 44 days and 55 days. 

On a Credit Card with an "interest free period", interest does not generally accrue until 25 days after the purchase is shown on a monthly statement (note exception below) - this is what is meant by "up to 55 days interest-free".  You can only get 55 days interest free if you make a purchase immediately after a statement is issued.  A Credit Card with no interest free period, usually a "fee free" Credit Card, interest accumulates from the day an item is purchased.

A Cardholder can forfeit the Interest Free Period for up to three months if repayment of its monthly Total Amount Owing is a day late or a dollar short, whereupon the applicable Interest Rate is charging (at an interest rate up to 25% pa) from the date of each Purchase;

"Each month, cardholders receive statements of their use of credit for transactions over the previous month. For a cardholder who has paid off their previous balance in full, credit cards typically offer an interest-free period of up to 55 days on new transactions, given that the cardholder typically has about 25 days following the end of the statement period to repay the statement balance. If the balance is not paid off in full, interest becomes due from the date of each transaction (and the cardholder will not benefit from an interest-free period the following month)."

Several Credit Card Issuers cancel the Interest Free Period for up to three months, if the Credit Cardholder does not pay 100% of the Total Amount Owing by the Payment Due Date, meaning the Interest Free Period is not available for three months, the Credit Cardholder is charged interest at up to 25% from the date of each Purchase, notwithstanding that the Official Cash Rate is 1½%.

"2.8 Typically, interest on credit card debt is only applied if a cardholder does not pay their balance in full at the end of the one-month statement period. As cardholders generally have about 14 to 25 days to pay their monthly balance, this means there is usually an interest fee period of up to 44 to 55 days, or thereabouts.  If a balance from a statement period is not paid off in full, then interest will be applied to the outstanding balance, and any transactions made since the end of the statement period will also attract interest from the date of transaction.8"

See Example 1 and Example 2.

"We agree that the interest free period encourages potential Cardholders to take up card products and existing cardholders to utilise their cards.....The interest free period is again, a Card Issuer / card holder relationship cost......The introduction and length of interest free periods was determined by credit Card Issuers to facilitate credit card take up and usage – both revenue generating activities for themselves. We find it implausible that Issuers sought to introduce interest free periods for any reason other than to increase their own income levels."

"Most credit card accounts also offer interest free periods, typically around 45 to 55 days, for purchases and payments, so that customers can access interest free credit by paying the balance outstanding by the due date."