What Is a Grace Period on a Credit Card?

Taking advantage of your credit card grace period can help you save a lot on interest. However, it’s important to fully grasp the rules and plan your payments accordingly. If you don’t, you could end up hurting both your budget and your credit score.

Let’s take a closer look at credit card grace periods, how they work, and when they apply.

What is the grace period on a credit card?

The grace period on a credit card is the time between your statement closing date and the payment due date. For many credit cards, this period is 21 days, although there are exceptions. If you pay off your statement balance fully during this period, you probably won’t have to pay any interest on your purchases. 

What is grace period on a credit card? Many people think of it as their late-fee buffer. However, that’s not really how it works. 

You should make payments on time in order to avoid late fees and negative marks on your credit report. However, what the grace period actually determines is whether you pay interest on purchases.

You may also hear the word “grace period” used to talk about promotional offers, like cards that offer 0% interest for the first few months. These temporary features are not the same as monthly grace periods. There’s no special occasion needed to take advantage of your grace period, as it is a standard billing feature.

You should also keep in mind that credit card grace periods typically only apply to purchases, not other transaction types. Cash advances and balance transfers may start accruing interest immediately.

How do grace periods work on credit cards?

The grace period is closely tied to your billing cycle. Every billing cycle, the purchases you’ve made over the past month are posted to your account. At the end of the cycle, the credit card issuer generates a statement that includes your statement balance and a due date.

Your statement balance is how much you have to pay in order to take advantage of the grace period. It might be higher than your current balance. That’s because it doesn’t include any purchases you made after the statement’s closing date. 

The statement balance is also different from the minimum payment. The minimum is how much you have to pay in order to avoid being marked as late. It’s often a percentage of the statement balance.

The credit card grace period allows you to pay off the entire statement balance by the due date to avoid paying interest. If you make a smaller payment, then interest will still apply, but only to the remaining amount.

How grace periods can avoid interest

Keeping track of grace periods is a good way to avoid paying interest on a credit card that you use for everyday purchases or bills. Paying off the statement balance fully means that you don’t pay interest on purchases from that billing cycle.

Clearing the statement balance is the important part. After you pay it, you may still have a current balance. This happens if you make purchases after the statement closing date. That’s okay. You can continue to use your card for purchases without affecting the grace period. 

At the end of the next billing cycle, you can pay off the new statement balance in order to avoid paying interest on those purchases.

One good way to ensure that you always take advantage of the grace period is to set up autopay for your cards. That way, your payments will always align with the due dates with no risk of owing interest because you forget or mistime a payment.

How long are grace periods?

Most credit cards have a grace period of 21 days, although some may be 25 days. You can check this information by accessing your account through the credit card issuer’s mobile app or website. You can also refer to your original contract for more details.

The calendar can affect how many days you have to make your payment. If a due date falls on a weekend or holiday, it will typically be extended to the next day. However, weekends and holidays can affect how quickly funds can be transferred. To be on the safe side, always pay your statement balance a few days in advance of the due date.

When you lose your grace period

There are certain situations where you can’t take advantage of the credit card grace period to avoid interest. 

Carrying a revolving balance is one of the most common situations. If you don’t pay off the previous statement balance in full, any new purchases can start building interest right away.

Trailing or residual interest is another detail that can complicate the process. Even after you pay a balance, there may be interest accruing between the statement closing date and the time the payment posts. This depends on how your issuer calculates interest, but it can lead to a small interest charge appearing on your next statement.

Certain transaction types can also affect whether you pay interest. Cash advances will start accruing interest immediately. Balance transfers have a wide range of terms and conditions, depending on the issuer and type of card. Any returned payments can incur additional fees.

If you’ve lost the grace period for one month, don’t worry. You can still take advantage of it the next month. Fully paying the statement balance will return your account to paid-in-full status. As long as returned payments or other factors don’t impact your account, you should be able to use the grace period in the future to avoid paying interest.

Building stronger credit can help you access credit cards with better features and benefits, and understanding grace periods can allow you to take full advantage of them without paying interest. You can build credit with Kikoff, with no hard credit check required to sign up.

Make the most of your credit card grace period

A grace period can let you use your credit card for purchases without paying interest. However, it only works in your favor if you make payments on time and fully pay off the statement balance. Keep track of your statements and stay on top of the grace period in order to save money and build your credit.