Credit Card Grace Period Explained

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What is the Grace Period on the Credit Card?

Most credit cards have a grace period, which is the amount of time you have to pay your balance in full without paying a finance charge. The grace period usually starts on first day of the billing cycle and ends a certain number of days after, depending on the credit card issuer. Grace periods are typically between 21 and 25 days. Longer grace periods are better because they give you more time to pay off your credit card balance and avoid interest charges.

You can find details about your grace period in your credit card agreement or on your credit card statement. Read the back of your credit card statement for details on "How your finance charges are calculated." You can find a copy of your credit card agreement on your credit card issuer's website.

When You Might Not Have a Grace Period

Certain types of balances may not have a grace period. For example, cash advances and balance transfers don't typically have a grace period and begin accruing interest as soon as the transaction posts to your account (assuming you don't have a 0% promotional rate in effect). You need to pay these balances off immediately if you want to avoid paying interest. If that's not possible, pay off the balance as soon as you can so you can minimize the amount of interest you pay.

New purchases may not have a grace period if you start the billing cycle with a balance. That includes cash advance and balance transfer balances as well as a purchase balance.

To avoid paying finance charges, you need to pay off your balance in full each month so you begin the billing cycle with a $0 balance.

So you can take full advantage of your grace period, credit card issuers will be required to mail your billing statement at least 21 days before finance charges would be assessed.

However, your credit card statement won't give you any indication as to whether your credit card balance has a grace period. This is something you have to keep up with on your own.

If you're making just the minimum payment on your credit card, the grace period won't apply. You'll be charged interest on the unpaid balance plus your new purchases each month until you've completely paid off your balance. Only then will the grace period apply to new purchases.

Payment Grace Period on Loans

Loans also have a payment grace period which is the period of time following payment due date that the loan will not default even though payment is due. You can make your payment after the due date, but during the grace period to avoid late payment penalties.