Many People Don't Realize They're Getting an Interest-Free Loan Every Month

Many people don't realize they're receiving an interest-free loan each month. These are individuals who use credit cards, either for their daily expenses or in other cases. Credit cards work in such a way that the bank pays for the card transaction the day after a purchase is made, but the cardholder has up to 37 days to pay for the transaction, depending on which day of the billing cycle the credit card transaction occurs. Thus, credit cards can be viewed as an excellent loan option, especially in the current interest rate environment. However, it should be noted that if the card balance is not paid by the due date, interest and fees will be charged on the debt.

Let's take an example. A Platinum Rewards cardholder who uses their card domestically for 350,000 ISK each billing cycle. On average, the bank is financing their transactions for 19 days. Assuming the cardholder deposits these funds into a high-interest savings account earning 7.75% annual interest, they earn 1,432 ISK per month, which amounts to 17,179 ISK annually. Not only that, but they also receive 25,200 Icelandair loyalty points as a bonus.

Another example. A Premium World cardholder who uses their card for 700,000 ISK each billing cycle (both domestically and internationally). On average, the bank is financing their transactions for 19 days, just like with the Platinum card. Assuming they deposit these funds into a high-interest savings account earning 7.75% annual interest, they earn 2,862 ISK per month, which amounts to 34,359 ISK annually. Additionally, they also receive 100,800 Icelandair loyalty points as a bonus.

Now someone might say, what about the annual card fee? Yes, the cards certainly have annual fees, but in return, the cardholder receives various benefits, such as travel insurance. The annual fees are fixed and not related to the card's spending volume. Those who pay higher annual fees typically enjoy more extensive benefits than those who pay lower fees, but all credit cardholders have access to emergency services that are available 24/7.