A grace period is the span of time when your credit card company won’t charge any interest on new purchases. It is usually the time between the end of a billing cycle and the payment due date.
Tired of paying high interest on your credit card?
Well, a credit card grace period can help you. But what is a grace period on a credit card?
That’s what we are going to find out in this post on credit card grace period. Moreover, I’ll also cover how it works, how long your credit card grace period is, and many more. So, stick here.
What Is A Grace Period On A Credit Card?
A credit card grace period is the time between the end of a credit card billing cycle and the payment due date. It only applies to your credit card purchases not to cash advances and balance transfers.
A credit card grace period is entirely different from a loan or insurance grace period. On the contrary, credit card companies are not required by law to provide a grace period.
So, different credit card companies have different policies regarding this. As a result, please check the terms and conditions of your credit grantor to find out whether they provide a grace period or not.
Also, remember that the grace period and interest-saving balance are not the same things. Now let’s look at how it works.
How Does A Credit Card Grace Period Work?
The working mechanism of the credit card grace period is quite simple. Here is how it works
- On the first week of every month, your last billing cycle ends and you get a bill with a payment due date.
- Between getting the bill and the due date there are at least 21 days.
- With a grace period, you won’t be charged any interest on credit card purchases for 21 days.
So, that means, if your credit card has a grace period and you pay the bill fully within the due date then you don’t have to pay any interest or late payment fee on purchases. Let’s look at an example to understand better.
Credit Card Grace Period Example
Let’s look at the example below to understand the credit card grace period.
Suppose Mr. Wick has a credit card with a grace period. Now he has purchased a $169 AirPods using a credit card on 1st October. The billing cycle of his credit card ends on 4th October and the payment due date is 27 October.
Now the period between 4th and 27 October is the grace period for Mr. Wick’s credit card. So, if he does not have any past balance and pays his bills within this period then he does not have to pay any purchase APR on the $169 AirPods purchase.
Now that we know how a grace period works on a credit card. So, it’s time we find out How long is a typical grace period on a credit card?
What Is A Typical Grace Period For A Credit Card?
The typical grace period for a credit card generally ranges from 21 to 30 days. However, it can not be less than 21 days but it can be higher than 30 days depending on your card’s policy.
Though there is no law on whether a credit card company has to provide a grace period or not. But if a company provides a grace period then it has to be 21 days. Because according to federal law
The interval between the end of a credit card billing cycle and the payment due date must be 21 days.
So, if your credit card company provides a grace period then you will have a minimum of 21 days before they start charging any interest or fees on your purchases. But is there any requirement for a credit card grace period?
Eligibility Requirement For A Credit Card Grace Period
Firstly, your credit card company must offer a credit card grace period. Then the requirements can be similar to the below points
- You will only get a grace period if you have paid all your past bills fully and there is no remaining balance on your credit card.
- The grace period is only applicable for purchases.
- You won’t get a grace period if you have only paid the minimum balance.
- Your grace period will be applicable according to your particular credit card policy.
- You will lose your grace period if you carry a balance on your credit card from month to month.
In case you have lost your grace period then don’t worry. Because you will be eligible again once you clear all your remaining balance.
Different companies have different policies regarding the grace period. So, please read your credit card policy to find out your grace period requirements.
How Can I Maximize My Credit Card Grace Period?
Paying your bill fully within the grace period can help you maximize your grace period benefits. Because by doing so you can avoid paying high interest and it is also good for your credit score. We all know how bad credit card debt can be. So, using the grace period might be the best option to avoid crippling credit card debt.
Why Is It Important To Pay Your Full Bill Within The Grace Period?
There are a few reasons why you want to pay your full bill within the grace period.
- Firstly, if you don’t pay the full amount, you’ll be charged interest as high as 20% or more.
- Second, if you’re late on your payment, then the interest and balance can pile up quickly at an amount you won’t be able to pay. As a result, your credit score may go down.
- In addition, your interest rate may go up.
These are just a few reasons why it’s important to pay your full bill within the grace period.
What Happens If You Carry A Balance After Your Grace Period?
If you carry a balance after your grace period then your grace period will expire. As a result, you will be charged regular APR on your credit card purchases.
Grace periods are for encouraging users to pay their credit card bills on time. So, when you still carry a balance after the grace period, you will lose your grace period and be charged regular interest.
However, if you pay the balance with interest within the next due date then your credit grantor might offer you a grace period again.
By Now we have found the answer to What is a Grace period on a credit card. Now let’s look at some of the related queries.
FAQs
Here are some of the frequently asked queries related to this topic.
Does Using Grace Period Hurt Your Credit?
No, grace periods never hurt your credit score.
Grace periods are just credit card features. Using it has no negative impact on your credit score. Because you are not showing any bad financial habits and not paying up loans while using a grace period.
On the contrary, using a credit card grace period is a smart financial decision. So, there is no chance of a grace period hurting your credit score.
Is a Short Grace period better for the Borrower?
Whether a short grace period is better for the borrower depends on the individual borrower’s circumstances. The good thing about a short grace period is it helps borrowers develop good financial habits and reduce the total amount of interest paid. On the other hand, the bad thing about a short grace period is it can increase stress, anxiety and make it more difficult for borrowers to make timely payments.
Does the 10 day Grace Period affect your credit?
No, using your grace period will not affect your credit score as long as you pay your bill in full before the grace period ends. No matter how long your grace period is if you pay the bill on time your credit score won’t get hurt. But a 10 day grace period can increase financial anxiety.
Are you charged Interest during Grace Period?
No, you are not charged interest during the grace period. The grace period is the time between the due date of your credit card statement and the date your payment is considered late. It typically lasts around 21 days. If you pay your bill in full before the grace period ends, your payment will be considered on time and you will not be charged interest.
Does a 7 day late payment affect credit score?
A 7-day late payment will not affect your credit score as long as you make the payment before it is reported to the credit bureaus. This typically happens 30 days after the due date. However, some creditors may report late payments as early as 15 days past due.
In Summar
A grace period is the best option for you to avoid high interest on your credit card balance. As a result, you should take full advantage of it and avoid credit cards with no grace period.
However, before getting a credit card with a grace period, please make sure you have completely understood the credit card policy.
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