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What Is a Credit Card Grace Period?

Your credit card grace period — which must be at least 21 days long — is how long you have to pay off your statement balance before paying finance charges.

Whether you just got your first credit card or are a credit card veteran, you may not be getting all of the value from your card that you can.

If you aren’t taking advantage of your credit card grace period, you could be unnecessarily paying extra interest charges. 

By using your grace period strategically, you can save a little bit of money.

And, if you carefully time your purchases, you can even spread out your charges to make major purchases more affordable.

What is a Credit Card Grace Period?

A credit card grace period is the time between when your billing cycle ends and the date your minimum monthly payment is due.

Most importantly:

During the grace period, the card issuer may not charge you interest as long as you pay your statement balance in full. 

Not all credit card issuers offer a grace period. It isn’t a requirement that they do so.

However, many issuers do offer them.

Why is it important?

If you use your credit card to complete purchases throughout the month, a credit card grace period can help you save money.

If you don’t carry a balance and instead pay off your balance in full each month by the payment due date, you can avoid paying interest on your purchases. 

Because no interest is charged, you can use your card — and earn valuable rewards — without paying extra for your purchases. 

To show you how valuable this can be, let’s look at an example.

Let’s say you started off with a $0 account balance on a rewards credit card offering 2% cash back. On September 1, you bought a new computer and paid $1,000 for it. Your billing cycle closed on September 15 and your payment is due on October 5. 

If you paid off the $1,000 balance by October 5, you’d pay no interest on your new computer.

And, you’d earn $20 in cash back rewards.

Not only did you eliminate interest charges, but you actually got a reward just for using your credit card.

How Long Does the Grace Period Last?

In 2009, the government passed the Credit Card Accountability and Disclosure Act (CARD).

Under the law, your billing statement must be delivered to you no later than 21 days before the payment due date.

If a card issuer offers a grace period, the company must give you at least 21 days to pay off your statement balance before you have to pay finance charges.  

Even better:

While the minimum grace period is 21 days in length, some card issuers do offer longer terms.

Your grace period is dependent on the card issuer and the individual card. 

For example, Credit One’s credit cards offer grace periods of at least 24 days. With Discover, your grace period will be at least 25 days from the end of the billing cycle, or a minimum of 23 days for billing periods that start in the month of February. 

To find out how long a card’s grace period is, check the card’s terms and conditions, also known as the Schumer Box.

There is usually a line that says “How to Avoid Paying Interest on Purchases” that will detail how long the grace period is and when interest will be charged.

Avoid Losing Your Grace Period

If your card offers a grace period, paying off your statement balance in full is a great way to save money.

However, it’s important to pay off your statement balance in full each and every month.

Otherwise:

You could lose the grace period as a benefit. 

If you carry an outstanding balance from month to month, the card issuer can remove the grace period.

That means that any new transactions you make will immediately incur interest charges. 

For example:

If you had a $1,000 balance and paid off $950 by your payment due date, you’d carry a $50 balance.

Because you didn’t pay off the statement balance in full, you’d lose the grace period.

That remaining $50 would accrue interest, and any purchases you made after that would, too. 

You can regain a grace period by paying off your statement balance in full for at least two consecutive months, but avoid carrying a balance at all to ensure you don’t pay added interest fees. 

Maximizing Your Grace Period

If you’re planning on a major purchase, such as a new appliance or a vacation, there is a way you can maximize your grace period and give yourself more time to pay off your charges without paying interest. 

If possible, time your purchase so that you make it right after your statement close date.

If you do that, you’ll have nearly two full months to pay down your balance without paying interest charges. 

For example, let’s say your billing cycle ended on 10/15, and your payment due date was 11/12. If you booked a trip on 10/17, you wouldn’t have to pay that off until the next payment due date in December.

Timing your purchase will allow you to spread out the cost, making it more affordable. 

Grace period timing

Cycle Start Date Cycle End Date Payment Due Date
9/16 10/15 11/12
10/16 11/15 12/12
11/16 12/15 1/12

Do Grace Periods Apply to Other Transactions?

Unfortunately, grace periods usually only apply to new purchases.

Other transactions, such as cash advances, direct deposits, check cash advances, or balance transfers, are typically ineligible. Interest will start accruing from day one. 

In addition, some transactions are subject to a higher APR than purchases.

For example, cash advances tend to have higher rates than purchases, so you’ll pay more in interest fees.

Other Key Terms and Dates

There are other key terms and dates you should know so that you can manage your card effectively and avoid costly fees: 

  • Statement balance: To avoid paying interest charges, you must pay off the amount listed under statement balance in full by the due date. 
  • Billing cycle: The billing cycle is the number of days in your billing period. 
  • Minimum payment due: The minimum payment is how much you have to pay by the payment due date to avoid late fees. It can be anywhere from 2% to 4% of your balance. 
  • Payment due date: The payment due date is when your creditor must receive your payment. Otherwise, they can charge you a late payment fee. 
  • Statement or billing cycle date: The statement or billing cycle date is when your statement closes for the month. Only transactions during the billing cycle up until that date are included in the statement balance. 
  • Outstanding balance: The amount of money owed on the account, including purchases, balance transfers, and cash advances. The outstanding balance includes charges that were made since the statement date. 

Using Your Credit Card Wisely

Using a credit card to make your purchases can be a smart way to earn rewards and track your spending.

However, many people avoid them because they’re worried about costly interest charges.

But if you use your card wisely and take advantage of the credit card grace period, you can avoid paying any interest.

And, paying your card off in full each month and by the payment due date will help boost your credit score.