Understanding the credit card grace period: What every user should know

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What is a grace period?

A grace period on a credit card is the time between the end of your billing period and your payment date. During this period—usually 18 to 25 days—you can pay off your balance in full without charging interest on your purchases. If you're extending a balance into a subsequent cycle, though, the grace period usually disappears, and interest charges become effective upon immediate effect.

How it helps you avoid interest

The main advantage of a grace period is borrowing without paying interest. If you pay the statement balance in full by the due date, you will not be charged interest for new purchases made within the billing cycle. This is one of the most important advantages of paying responsibly on your credit card. But this has to be valid when you pay in full and on time at regular intervals.

When the grace period is not valid

Not all transactions qualify for the grace period. Cash advances and balance transfers usually start earning interest from day one. And if you only pay in instalments or transfer debt from one billing cycle to another, your card issuer will probably be imposing interest on new purchases right away, with no grace period at all.

Why paying in full matters

Even a minimum balance negates the grace period, so further purchases will attract interest from day one. It is on this basis that we would advise utilizing the grace period as a cash flow tool, not as an opportunity to make more than you can repay. Paying full amount every month keeps this interest-free benefit on the table.

Maximizing the grace period

To make the most of the grace period, remember your billing cycle dates. Attempt to make large purchases at the beginning of a new cycle, giving you the maximum number of days to pay interest-free. Having reminders or automatic payments set up can also ensure that you never miss a payment due date and forfeit your grace period benefits.

FAQs

Does every credit card have a grace period?

Most do, but not all. Some cards, especially those sold to people with bad credit scores, might not provide one. Always check the terms and conditions of your card.

Can I restore a lost grace period?

Yes. If you have a balance and lose the grace period, paying your balance in full for at least one billing cycle will usually restore it.

Does the grace period expire on cash advances?

No. Cash advances often begin to accrue interest right away, with no grace period, so they are a costly way to borrow.