Credit card with an interest-free period: bank conditions

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

The number of banks is growing every day, and they are all fighting for customers. Credit cards are a very convenient banking product, and bankers use various advertising and marketing mechanisms to promote them. As a rule, lenders try to increase the period of free use of finance, which is commonly called the grace period. Allegedly, no interest is accrued during this time for the use of borrowed finances, but is this really so? After all, the offers are very tempting, and in some cases the interest-free loan period can reach 200 days. What is the catch, and is it really beneficial for the average person?

How the grace period is calculated

The mechanism of interest-free or concessional lending has been used for a long time and works as follows:

1. A credit card with an interest-free period is opened at the selected bank or comes by mail.
2. The billing period begins - the time for which you buy on the card; in turn, the bank controls the amount of costs and usually provides 30 days for this. Often the beginning of this period is considered the moment of card activation (sometimes the starting pointserves as the first transaction using the card).
3. The credit card grace period begins, also called the billing period. During this time, the debtor is obliged to return to his creditor all the kindly provided funds. To avoid paying interest on a loan, all you need to do is pay back the entire borrowed amount on time.

The period of interest-free use of bank finances is summed up from the grace and settlement periods, so that the total is at least 50 days.

When you need to pay interest

In cases where the funds taken on credit cannot be fully repaid, the bank will charge interest on the money spent during the billing period. The end time of the grace period is the date on which the minimum payment is made, which is 5 to 10 percent of the total debt, plus interest on the loan.

At the end of the first settlement period (thirty days), the second and subsequent ones will begin. It will operate simultaneously with the payment period. This means that by paying the debt for previous purchases in a timely manner, it is quite possible to use the card to make new ones.

Specificity of calculations

Determining the amount of accrued interest directly depends on the duration of two periods: payment and settlement. For a simpler explanation and understanding, it is better to resort to a specific example.

Example

StartThe billing period is the moment when a credit card with an interest-free period is received at the bank or, in some cases, its activation. If we assume that the date of activation of the card was March 1 and 30,000 rubles were spent from the card in a month, then April 1, i.e. after 30 days, will be the final of the first billing period. The bank will sum up and find out how much finance was spent over the past month, and provide the client with a notification indicating the amount of the debt. In this case, it will be 30,000 rubles. Information can be provided in several ways:

• alert via SMS;
• Internet banking;
• call to the bank's call center.

Then the pay period will follow. Suppose it is 20 calendar days. Thus, it turns out that it will end on April 21st. Summing up both periods, we get 51 days, which the bankers present as a credit card grace period, or interest-free.

It turns out that a client who is not eager to pay interest for using bank money will have to reimburse all costs until April 21. This does not mean that the entire amount must be returned at a time, you can divide it into several payments, the main thing is that by April 21 the entire amount will be on the card (in this example, 30,000 rubles).

If more funds are needed

It is important to note that a credit card with an interest-free period does not prohibit the further use of credit funds during grace periods. You can continue to buy with a credit card, unless, of course,credit limit allows. If, in addition to the funds already borrowed, another 5,000 rubles were needed, and they are on the card, the client has every right to use them, but in order not to pay loan interest, by April 21 it will be necessary to return not 30,000 rubles, but all borrowed 35,000 rubles.

If it is not possible to fully repay the debt, it does not matter. Just by April 21, the client will need to make at least the amount of the minimum payment. In some cases, it varies from 5% to 10%.

For this example, let's assume that the minimum payment should be 10% of the debt. Thus, at the end of the grace period, at least 3,000 rubles must be credited to the credit account. All information is usually contained in statements that banks try to provide to their customers in writing. They take into account transactions for the billing period, i.e. until April 1.

The next settlement period, which will last from April 1 to May 1, deserves special attention. Until April 21, two periods intersect and seem to overlap each other. That is, if the debt is not paid in full by April 21, the amount of the minimum payment will be calculated taking into account the total debt on May 1.

In the variant under consideration, 30,000 rubles were first spent, 10% of which was paid as a minimum payment. Then, after April 1, another 5,000 rubles were withdrawn from the card. Thus, credit card debt on May 1will be 32,000 rubles, and the minimum payment, therefore, will be 3,200 rubles. Funding will be required by May 21.

The banking offer of loans with a long grace period of one hundred days or more seems extremely attractive. The first settlement period for such cards, as in the first case, is 30 days, and the client can pay the bank debt without extra interest within the next seventy days.

Calculation of the interest-free period from the first purchase

This option is also possible when the billing period does not start from the moment the card is issued or activated, but only from its first use. Such a credit card with an interest-free period is the most beneficial for customers. This is due to the fact that after the card is issued, it is not necessary to use it immediately, it can be applied when required. That is, in the presence of this banking product, a person always has some kind of financial reserve. And interest is calculated without any tricks.

Suppose that the card was received via mail on March 1st, and paid for purchases only on March 24th. Thus, adding 30 days to this date, it turns out that the end of the billing period will fall on April 23. In order to avoid paying interest, you must pay off the entire debt by May 13. This is when the grace period of 50 days will end.

When the payment period is strictly fixed

Do math and figure out calendar boundariesperiods (grace, settlement) is not always convenient, so some banks appoint specific days of the month to determine the periods. In this case, there is no link to the moment of receipt of the card or the beginning of its use. Often, the end of the billing period is the first day of the month, and the end of the grace period is the 20th or 25th day of the month following the billing period.

Example

In an example, it looks like this: for a credit card received on March 1, the billing period will end on April 1, regardless of which day of the month the card was used. And the credit institution will wait until April 25 to pay off the entire amount of the debt, or at least make the minimum payment.

Various conditions of banks

Even one bank can offer cards with different credit conditions. This tactic is used by Alfa-Bank, which offers its customers two types of cards:

1. A credit card with a 100-day interest-free period, which starts from the moment you receive the card and consists of a 30-day billing period and a 70-day grace period.
2. Co-branded credit card with an interest-free credit period, created in conjunction with large companies (eg airlines). For this banking product, the grace period has been reduced to 60 days.

The starting point of the billing period is the date of card opening, such lenders as Home Credit and Sberbank. The grace period of their cards is 50 days.

Bank "Russian Standard" increases this period by 5 calendar days, 30 of which relate to the settlementperiod, and 25 - to the grace period.

The Tinkoff interest-free period is the same number of days, but it starts from the first purchase. But the credit card with an interest-free period "VTB 24" has different varieties depending on the size of the loan, but the grace period is minimal and is 50 days.

Longest Grace Period

A credit card with an interest-free period of 200 days is extremely rare; today Avangard Bank offers such a product to its new customers. The amount on such a credit card is small, but the maintenance of the card is quite expensive. Yes, and you can use this offer only once.

Important points

When applying for a credit card, it is important to know that the grace period of most of them applies only to non-cash payments. It is quite difficult to find a bank whose loan products include a credit card with an interest-free period for cash withdrawals. Most lenders charge extra interest for ATM withdrawals.

When signing the contract, the client must familiarize himself with the payment schedule and a number of mandatory bank commissions, which will definitely be debited from the card and will be added to the total debt. As a rule, this is a card maintenance fee, SMS service, insurance.

It is necessary to check which date the bank will consider as the time of receipt of funds. It is not a fact that it will coincide with the day of the month when the money was paid. Usually, this is the time when funds are credited to the account, the difference between the dates can reach 3 days, even within the same credit institution. Not to mention postal transfers and other payment systems.

When deciding to open a credit card, you need to consider the purpose of its use, from which moment the interest-free period is considered. You will also need to carefully read the conditions of banks, which may differ significantly. There is no need to rush to the first offer you like, it is better to weigh the pros and cons in advance.