Interest-free days and interest amounts – what are the limits?

When you open a credit card account with your bank, you will receive certain benefits based, in part, on your credit profile.

The number of interest-free days and the interest rate are among the credit conditions that will apply. But what are the limits, or maximum amounts, of these figures?

Tip: Sign up with JustMoney to see how you can improve your credit profile.

How many interest-free days are allowed?

According to Sarah McLoughlin, growth head at FNB Credit Card, a period of interest-free borrowing applies to all credit card accounts, at the discretion of the banks. FNB, for example, offers an interest-free period of up to 55 days.

However, she explains that certain transactions, such as cash withdrawals, will attract interest immediately. Furthermore, only customers that settle their outstanding balances in full will qualify for the interest-free period.

McLoughlin advises customers to carefully review the terms and conditions relating to the interest-free period attached to their credit card. There are no regulations that restrict or govern the interest-free period, so this could differ from bank to bank.

What’s the maximum interest that can be charged?

In contrast, McLoughlin says, the maximum interest rate that can be charged on credit cards is limited by the National Credit Act (NCA). The calculation is based on the repo rate plus 14%.

“The current maximum interest rate charged is 17.50% (repo rate of 3.5% plus 14%). FNB offers customers a personalised interest rate based on their individual profile. This rate could be as low as prime,” says McLoughlin.

Besides considering the number of interest-free days and the interest rate that’s attached to a credit card, McLoughlin also suggests considering the following:

• The functionality available to you to easily manage your credit card. The ability to cancel and replace cards, and view PINs and statements on a banking app, are important.
• Additional convenience and security features, such as virtual cards, and the ability to easily report fraud and dispute transactions.
• Rewards and benefits offered, such as participation in rewards programmes and travel benefits, such as access to airport lounges and travel insurance.
• Fees, such as an initiation fee, monthly facility service fees, and monthly account fees.
• Digital payment capabilities such as Apple-, Samsung-, Garmin-, and Fitbit Pay.
• Personalised interest rates.
• Budget facility terms.
• The appropriate limit for your income and risk profile.

You can apply for a credit facility with MobiCred. Click here to find out more.