A credit card grace period is the 21-25 day period between when a credit card’s monthly billing statement becomes available and when the minimum monthly payment is due. Interest charges do not apply when a credit card’s grace period is in effect, giving cardholders the chance to pay their full balance by the due date at no extra cost.
The grace period on a credit card only remains in effect when you pay the full balance due by the due date each month. The grace period goes away when you carry a balance from billing period to billing period, and you have to pay in full two months in a row to get it back. Without a grace period, interest is assessed on a daily basis to your full balance, including any new purchases you make.
In other words, credit card grace periods are essentially an interest-free period for cardholders who pay every bill in full, allowing people to keep their money in their bank account for longer or giving them extra time to replenish their funds. But if you don’t plan on paying your bill in full each month, you won’t keep your grace period for long, and interest charges will be assessed daily.
Not all credit cards offer a grace period. But for those that do, it has to be at least 21 days long. To determine the grace period for a specific credit card, you can refer to your credit card agreement or your latest credit card statement. Grace periods only apply to purchases. Cash advances and balance transfers start getting charged interest immediately.
Pro Tip: Grace periods are a good reason for having separate credit cards for your debt and your everyday purchases. Having a credit card just for everyday purchases that you pay for in full by the end of each grace period will keep your everyday spending separate from any balance accruing interest. This also enables you to focus on getting great rewards with that card, since interest won’t be a concern. Similarly, you can concentrate on getting the best possible interest rates and fees on your other card, the one you designate for carrying a balance from month to month.
In the long run, keeping everyday purchases interest-free by taking advantage of your grace period and getting the right collection of cards for the transactions you plan to make will save you a lot of money.
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