For those who rely on credit cards to manage day-to-day expenses, deferring payments beyond 30 days can be helpful, especially for small business owners. Typically, credit cards come with a standard interest-free period of around 30 days, allowing cardholders to settle their bills by then without incurring any interest charges. However, for small and medium-sized enterprises (SMEs), MSMEs, freelancers, and professionals, some banks have introduced credit cards with an extended interest-free credit period of up to 55 days.
The main benefit is the extended credit free period, with some banks extending 50 days and some 55 days. These credit cards are designed for financial requirements of SMEs, freelancers, and professionals and designed to meet essential recurring business expense.
Eligibility Criteria: To get these cards, individuals typically need to meet certain eligibility criteria, such as having a minimum credit score of CIC 700, annual income, or existing business relationship with the issuing bank. Some banks extend cards to only entities classified as MSMEs under the constitutions revised definition, also requiring Udyam registration. Other banks extend these cards to self-employed individuals with an annual income tax return (ITR) exceeding Rs 6 lakh. Additional criteria may include being an existing customer of the bank of at least one year, working in the MSE sector, enjoying a specific operative loan limit that varies based on banks.
Expenses & Other Benefits: These cards normally come with an annual fees typically of Rs 500 and with an annual renewal fees that can range up to Rs 50,000. Cardholders enjoy special incentives on various transactions related to business, including EMI spends, GST payments utility bills, and some app payments.
The most recent cards in this category that were launched were by HDFC, and it offered 2 cash points on every Rs 150 worth business expenses. It also offered additional benefits such as accelerated rewards on select expenses like utility bill payments and business travel. If you are someone who travels constantly on business trips, note that these cards also offer travel perks, airport lounge access, hotel discounts, and also discounts on business software applications.
Risks & Maximising the Extended Interest-Free Period Benefit
To make the most of the extended interest-free period offered by these credit cards, users can make big-ticket purchases within the initial billing cycle. Thus users can benefit from an extended repayment window of 55 days, also optimising cash flow management by deploying working capital towards more productive or important purposes. However, avoid cash withdrawals through credit cards via ATMs, as these transactions are subject to cash advance fees.
Also dont fall in the trap of making just minimum payment, because even if one pays Re. 1 less than the full balance outstanding, the credit card issuing bank or financial institution will start charging interest on a daily basis on any amount that you withdraw since then.
