Understanding the ABSA Credit Card Interest-Free Period
Credit cards can be very useful, but figuring out how they work isn’t always easy. Let’s use an example to understand how interest-free periods work, particularly with an ABSA credit card.
Imagine you buy something with your ABSA credit card on the 20th of August 2024. ABSA offers an interest-free period of up to 56 days. This means that if you pay back the full amount within those 56 days, you won’t have to pay any interest.
How Billing Cycles Work
A billing cycle is a period between two consecutive billing statements. In our example, imagine your billing cycle starts on the 10th of each month because that’s when the debit order is set. If you made a purchase on the 20th of August, it is part of the billing cycle starting from the 10th of August and ending on the 9th of the next month (September).
If you don’t pay the full amount by the end of the billing cycle, the remaining balance will carry over, and interest will start to apply.
How Interest-Free Periods Work
The interest-free period applies to each new purchase, but it only works if you pay the full balance off within the interest-free period. Using our scenario, let’s say you have settled most of your credit card balance but still owe R400.
If you want to buy something new, it’s important to understand how your billing cycle will handle this. If you buy something before the 10th of September, it could still be within the same billing period as the purchase made on August 20th.
Key Points to Remember
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Interest-Free Period: Each transaction can have up to 56 days of interest-free credit, but only if there’s no outstanding balance from a previous cycle.
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Pay Off Your Balance: To avoid interest on new purchases, make sure your balance is zero at the start of a new billing cycle.
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Transaction Timing: If you want to ensure a new purchase doesn’t fall in the same cycle, wait until the new cycle begins, in this case after the 9th of the next month.
Tips for Managing Your Credit Card
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Track Your Billing Cycle: Always know when your billing cycle starts and ends. This helps you plan payments and new purchases better.
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Set Alerts: Many banks offer alerts for due dates and balances. This can help you avoid missing payments.
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Pay More Than the Minimum: If you can’t pay in full, try to pay more than the minimum amount. This reduces the interest you’ll owe.
Understanding how your credit card works can save you a lot of money in the long run. By planning your purchases and payments within your billing cycle, you can make the most of the interest-free period and avoid extra costs.