If the thought of paying credit card interest doesn’t sound like a fun thing, you’re in luck. As long as your card has a grace period and you can cover the bill, you’ll never have to pay interest charges again. All you have to do is pay your monthly balance in full before your grace period ends. How it works? This guide to credit card grace periods explains it all.
What is a credit card grace period?
The grace period on a credit card is the period you must pay for your purchases before you are charged interest. In other words, if your credit card has a grace period, this is the time when you won’t earn interest.
In general, the term “grace period” refers to the period of time between the closing of your credit card statement and the time the bill for that statement cycle is due. If you pay off your entire balance during the grace period, that is, before the due date of your bill, you will not have to pay interest charges on purchases in that grace cycle. billing.
For example, suppose you spent $ 500 during your credit card billing cycle that ended on October 1. Your credit card bill due date is October 25, so the grace period is 25 days. As long as you pay off the entire $ 500 balance at any time during those 25 days, you will not pay any interest on those purchases.
One thing to keep in mind is that only balances from new purchases will be eligible for the grace period. Thus, the balances of a balance transfer or a cash advance do not have a grace period. These transactions usually start earning interest as soon as they land in your account.
It is important not to confuse 0% APR credit cards with credit card grace periods. Some cards offer promotional 0% introductory APR interest rate offers for a set period of time after you first open your account. These offers allow you to maintain a balance without interest charges for the duration of the promotional offer, typically about a year. Your card’s grace period is separate from any promotional offers you may receive when you open your account.
How long is a typical credit card grace period?
The average grace period – the time between the statement and the bill due date – for most credit cards is 25 days. Some issuers are reducing the grace period to 23 days for February statements. However, grace periods may vary between issuers or even between cards.
At a minimum, your credit card grace period should be 21 days. This is because credit card companies are legally required to provide your invoice at least 21 days before they start charging fees. In contrast, grace periods longer than 25 days are rare. You will not see any grace periods greater than 30 days.
Do all credit cards have a grace period?
Not all credit cards have an interest-free grace period. There is no law requiring credit card companies to offer a grace period. Despite this, almost all of the major credit card issuers will offer grace periods, as you will see by comparing credit card offers.
The issuers most likely to skip the grace period are those targeting at-risk consumers with bad credit. Without a grace period, each card transaction is subject to interest as soon as it is posted. It can get expensive and make your credit card debt worse.
If you need a credit card for bad credit, consider a secured credit card. Most secured cards will have a grace period, as well as lower fees than risk cards.
What happens if you don’t pay the full balance after the grace period?
As long as you make at least your minimum payment, the main consequence of carrying a balance is interest charges. You will also lose your grace period until you return to a balance of $ 0.
Credit card interest is calculated based on your average daily balance, from the time a transaction arrives in your account. If you pay your balance in full during the grace period, this interest disappears. However, if you only make a partial payment, these interest charges will usually appear on your next statement. You will then have to pay your remaining balance, plus interest charges. and any new purchase, so that you can once again benefit from a grace period.
Let’s go back to the $ 500 balance example above. If you pay the full $ 500 during the grace period, you will not be charged interest. But what if you only make a payment of $ 100 on that balance? Your next statement will now include interest on your $ 400 balance, more interest charges on any new purchases you make. Until you pay off your entire card balance, interest will continue to accrue.
Of course, this assumes you’ve made at least your required minimum payment, even if you haven’t paid your balance in full. If you do not make at least the minimum payment, you will also be charged a late fee. If you continue to miss payments, you could also damage your credit score.