Understand Your Credit Card Grace PeriodNovember 19, 2010 - 8:47 am
One of the most important features of a credit card is the grace period. It determines whether you have to pay interest on your credit card balance or not. If you don’t know what your credit card grace period is, take a look at your billing statement or call your credit card issuer to find out.
What is a Grace Period?
The grace period is the amount of time you have to pay your balance in full every month and avoid interest charges. Grace periods vary from 25 to 20 days. The longer your grace period, the better because it means you have a few more days to pay off your credit card balance.
Credit card issuers have to mail your billing statement 21 days before your due date. Federal law also requires that grace periods, if your credit card has one, must last at least 21 days. As long as your payment reaches the credit card issuer by the due date, you’ll get grace period benefits. However, if you’re late, not only will you receive late payment penalties, you’ll also have to pay interest on the balance.
When the Grace Period Applies
With most credit cards, all new purchases get a grace period as long as you had a $0 balance when the grace period began. That means you paid off your balance in full last month. Otherwise, your credit card purchases won’t get a grace period.
You can read the section of your billing statement that details how finance charges are calculated to find out whether your new purchases have a grace period or not. If the section says “…including new purchases.” That means new purchases will be charged interest if you started the billing cycle with a balance.
Cash advances and balance transfers are other types of credit card transactions that don’t usually get a grace period. When your balance doesn’t get a grace period, interest starts accruing on the balance immediately. You can’t avoid paying the finance charge, even if you pay off the balance in full when the next billing statement comes.
Know How Long Your Grace Period Lasts
The grace period is one of the features credit card issuers must disclose to you when you apply for a credit card. The grace period is included with the credit card disclosures that must accompany all credit card offers. If you’re wondering about the grace period on a credit card you already have, check the front and back of your billing statement. Look for a box or statement that says “Grace Period” or “Amount of time to pay balance in full.”
Your credit card issuer can change your grace period, but they’re required to let you know your grace period has changed. These types of credit card changes are included as inserts included with your billing statement and, more often than not, are ignored by cardholders. Your grace period could change and, if you’re not paying attention, you wouldn’t know.
Of course, there are a few credit cards that don’t have a grace period. You’ll always pay interest with these credit cards, so avoid them if you’re the type who doesn’t like to pay interest.