Understanding credit card interest


Types of interest

There are two types of interest that may be charged on the balance of your credit card:

1. Interest on purchased goods and services

If you purchase goods or services with your credit card, and you don’t pay the full amount of your statement closing balance by the due date, you’ll be charged interest on the outstanding balance.

2. Interest on cash advances and dishonoured payments

If you withdraw cash from your credit card at an ATM or if you transfer money from your credit card account to another account, you'll be charged interest at the cash advance interest rate on a daily basis. 

We also charge interest on any dishonoured payments. A dishonoured payment is a transaction that was declined by us or another bank for example because you had insufficient funds in your account or your bank account was closed.

You will incur interest from the date the cash advance or dishonoured payment is processed to your account, to the time when the cash advance or dishonoured payment along with associated fees and charges are paid in full.

This means that unless you pay back the cash advance in full on the same day it is made as well as any fees, charges or purchases still outstanding from your previous statement, you will receive a cash advance interest charge on the next month's statement.


Interest charges

Interest is calculated on the outstanding balance of your credit card. You can find the purchase interest rate that applies to your card on our credit card rates and fees page.

If you don't pay your credit card balance in full, the remaining balance will roll into the next month's billing cycle and attract interest until it is paid off. 

Interest is always charged on the last day of your statement period. 

Once you've paid off your balance, the following month will include a final interest charge which is the interest owed for the period where you had an outstanding balance from the month before.

For more and detailed information, please refer to our Credit Card Conditions of Use.


Credit card payments

When you make payments to your credit card account, we allocate these in a particular way that ensures you pay off transactions that would attract a higher interest first, before clearing transactions with a lower  interest rate.

In general, we'll apply your payments in the following order:

1. Fees and interest charges.

2. Cash advances and dishonoured payments.

3. Purchases.

Here's an example:

You've got an ASB Visa Light with a 13.5% p.a. interest rate on purchases. You purchase some books online worth $150. You then withdraw $100 at an ATM and later in the day take advantage of the Smart Rate purchase feature to buy a new fridge worth $1,300.

Any payments you make to your credit card will be allocated in a way that ensures you pay off those balances that would attract the highest interest first. 

In this example, your payment would go towards clearing the cash advance fee and any interest incurred first, followed by the cash advance of $100. Your payment would then pay back the $150 online purchase and lastly the fridge.

Interest rate
1. Cash advance fee and interest charges
2. Cash advance
22.95% p.a.
3. Purchase
13.5% p.a.
3. Smart Rate Purchase
0% p.a.

For more information, please refer to 'Allocation of payments' in our Credit Card Conditions of Use.


Up to 55 days interest free

ASB offers up to 55 days interest free on purchased goods (or up to 50 days interest free on ASB Business credit cards). This means you can get a maximum of 55 days where you won't be charged interest on a new purchase (or related fees), provided you've paid the closing balance on your credit card statement in full the month before.

  • Your 55 days interest-free period starts on the first day of your statement period.
  • Please check your account summary details on your credit card statement for this date.
  • The number of interest-free days varies and depends on when you make the purchase during your statement period.

Let's look at two examples.

Say your statement period runs from the 9th of August to the 8th of September. You make a purchase on the first day of your statement period which in this case is the 9th of August, this means you’ll receive the full benefit of 55 interest free days.

If you make another purchase on the 10th day of your statement period which in this case is the 19th of August, you’ll receive an interest-free period of 45 days, provided you have paid off your balance in full the previous month. 

Tip: If you're planning on making a large purchase at the end of your statement period, consider waiting a couple of days until your new statement period starts to maximize your interest free days. 


Compare your credit card

You're in charge with an ASB Visa credit card. Low rate or rewards, the choice is yours.

Learn more about the different interest charges, rates and fees associated with your personal or business credit cards. Simply compare all of our credit cards so you can make the right choice.

Credit CardsUnderstanding how credit card interest charges work | ASB