Related FAQ's & Guides
Q. What is the allocation of payments clause?
A. The allocation of payments is a listed clause in the terms and conditions of every credit card. This clause basically states the order in which payments you make to your account will be applied.
How Interest Free Periods Work
Standard interest free periods come on all credit cards, and they offer a period of up to 59 days of interest free credit if you pay back your spending in full and on time each month.
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ALL credit cards offer a limited interest free period, and providing you repay your balance in full by the specified date each month, you won't have to pay any interest on your spending.
However, not everything is included in the interest free periods, and what is and what isn’t included can vary between credit cards.
Generally speaking, all credit cards include purchase spending in the interest free period. However, balances resulting from cash withdrawals, buying foreign currency, traveller's cheques and balance transfers outside of a promotional deal are more commonly not included in the interest free period.
What does this mean in terms of using my card?
To really benefit from the interest free period offer as standard on all credit cards, you should only use your credit card for purchases - unless cash transactions are also included in the interest free period.
Then, if you always repay your statement balance in full and on time each month by the specified date you’ll never be charged a penny in interest.
Credit cards offer varying interest free period lengths, ranging from 45 days to 59 days. Compare credit cards by their interest free period here.
How will I be charged for transactions not in the interest free period?
If you withdraw cash or buy foreign currency on your credit card – and cash transactions are not included in the interest free period – you’ll be charged interest from the date of the transaction until it is repaid in full – even if you repay your balance in full.
How can I find out what is included in my interest free period?
The best way to determine what is and isn't included in the interest free period on your credit card is to ensure that you read the small print.
Generally, most credit cards cover only purchases in the standard interest free period. So any transaction resulting from buying goods or services can be made on your credit card - and then if the statement balance is repaid in full - these transactions won't incur any interest charges.
Cash withdrawals made on your credit card are generally not included in the interest free period, and in addition to incurring interest charges you may also incur handling fees.
Other cash transactions are the same - you will not get any interest free period on them, and you will incur additional charges from the card issuer. Transactions such as buying foreign currency or traveller's cheques, getting 'cash back' from the supermarket, gambling, bill payments and buying gift cards or vouchers can all be classed as cash transactions.
What about 0% extended ‘interest-free-periods’?
Credit cards offering extended 0% 'interest free periods' have become very popular over recent years, as they give you the chance to enjoy some extra time to repay your spending or current card debts without running up charges in interest.
These 0% deals are slightly different from the standard interest free period offer on all credit cards.
0% deals offer a zero percent interest rate on a certain balance - balance transfers and / or purchases - for a period of time.
Unlike the standard interest free period, 0% deals offer a period of no-interest for a number of months, even up to or over a year.
Although, they do not require you to repay the whole balance each month to avoid interest charges, they still require you to make at least the minimum monthly payment to keep the promotional rate of interest.
See 0% balance transfer credit cards or 0% purchase credit cards.
See 0% balance transfer and purchase credit cards – only if you intend on using both offers - due to the way payments made are allocated to balances, if you want to transfer to and spend on a 0% deal card you need a 0% offer on both balances that will last for the same length of time - however you will find much longer 0% periods on sole-use 0% balance transfer or 0% purchase credit cards.
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