Understanding Your Credit Card’s Grace Period

Blog Post05/18/2016
Credit Advice

Paying your credit card balance in full every month can help keep more of your money in your pocket. Most credit cards offer a grace period, allowing consumers to make purchases without accruing any interest. Understanding how these grace periods work can help maximize your savings. 

Interest-Free Purchases

The credit card grace period is an incentive offered by most card companies as a reward for paying your bill in full each month by the due date. This interest-free period typically extends from the end of your last billing cycle to the day your bill is due.

Credit card companies must give you at least 21 days from the date of receipt of the bill to pay it, according to the Federal Credit Card Accountability, Responsibility and Disclosure Act of 2009. You’ll have a minimum of three weeks without accruing interest on your bill, and possibly as long as 25 days, if you qualify for a card company’s interest-free time. The length of the grace period varies by individual card companies. 

Carrying a Balance

You’ll lose the benefit of the grace period if you carry forward a balance of any amount, even one dollar. You’ll be charged interest on any leftover balance, and new purchases will start accruing interest on the day the purchase is made.

Interest is charged until the day the lender receives your payment. Some of this interest may not show up on your bill until the following statement, so it will appear that your bill has not been paid in full. This can affect your no-interest status. 

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Getting Back on Track

Falling out of the grace period because you didn’t pay your bill in full can be a temporary setback until you get back on track with your payments. Check your agreement with your financial institution or contact your card issuer to find out how you can be reinstated so you can make purchases without accumulating finance charges. Some cards may require that you pay your balance in full for two consecutive months before you can qualify for no-interest purchases again.

Grace Period Exceptions

The interest-free perk is usually only reserved just for purchases. Cash advances and checks written from your credit account are generally not included, and they’re generally charged a different interest rate as well. The interest rate for each type of transaction should be on your bill. Contact your card provider for details on specific interest rates if you don’t see it there.

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