Credit Card Grace Period Explained

A woman pays credit card bills using a tablet

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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 the 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. A longer grace period gives 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." If you want to reference your credit card agreement, you can find a copy of your credit card agreement on your credit card issuer's website or you can contact your credit card issuer to have a copy mailed to you.

When You Might Not Have a Grace Period

Certain types of credit card transactions may not have a grace period. For example, cash advances and balance transfers don't typically have a grace period. Because these transactions don't have a grace period, they begin accruing interest as soon as the transaction posts to your account (assuming you don't have a 0% promotional rate in effect). If you want to avoid paying interest on a transaction that doesn't have a grace period, you'll have to pay it off immediately. When that's not possible, you can instead pay off the balance as soon as possible to minimize the amount of interest you pay.

In addition to cash advances and balance transfers, new purchases may not have a grace period if you start the billing cycle with a balance. To avoid ever paying finance charges on your credit card, you need to pay off your balance in full each month so you begin the billing cycle with a $0 balance.

The Requirement to Transmit Your Billing Statement

To give you the opportunity to take full advantage of your grace period, credit card issuers are required to mail your billing statement at least 21 days before finance charges would be charged to your account. 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 only making the minimum payment on your credit card each month, 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, but it's not the same as a credit card grace period. With a loan, the payment grace period 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.

Student loans have a six months grace period after you've graduated or your enrollment has dropped below half-time. After this six month grace period, your student loan goes into repayment and you're required to make a payment each month.