Credit Card Grace Period

What Is a Grace Period on a Credit Card?

A credit card grace period is a stretch of time during which you don’t owe interest on your purchases. It lasts from the end of your billing cycle to your due date, which is usually 21 to 25 days. The lack of interest during the grace period gives you the chance to pay your full balance by the due date at no extra cost.

The grace period only remains in effect when you pay the full statement balance by the due date each month. It goes away when you carry a balance from billing period to billing period, and you have to pay in full for two months in a row to get it back. Without a grace period, the issuer charges interest on a daily basis, including on any new purchases you make.

Key Things to Know About Credit Card Grace Periods

• Duration: The grace period is usually between 21 and 25 days, though this can vary by credit card issuer.
• What It Applies to: It applies to new purchases only, not cash advances or balance transfers.
• Interest-Free Period: The grace period lasts from the end of your billing cycle until your payment due date. If you pay off your entire statement balance by the due date every month, you won't be charged interest on your purchases.
• Applicability: Grace periods generally apply to new purchases. A grace period doesn’t apply to cash advances or balance transfers, which start accruing interest immediately.
• Requirements: To benefit from the grace period, you must pay the full statement balance. If you carry a balance from month to month, you lose the grace period, and interest will be charged on new purchases immediately.
• Regain a Grace Period: If you lose your grace period by carrying a balance from month to month, you can usually regain it by paying your full balance by the due date for two months in a row.
• Availability: Credit cards are not required to have grace periods, but the vast majority of credit cards have them. It’s always good to check the terms and conditions before applying. If a card does offer a grace period, by law it must last at least 21 days.

Below, you can learn more about credit card grace periods and how they work.

How Does a Credit Card Grace Period Work?

A credit card grace period gives you a short reprieve between when you make purchases and when the bill comes due, during which you have the opportunity to avoid interest. However, you must fulfill certain conditions in order to keep the grace period long-term.

The following list lays out exactly how your credit card’s grace period works.

1. You make purchases on your credit card.
2. Your monthly billing cycle closes on a certain date. Then, you receive a statement listing the due date along with the minimum payment you must make to keep your account in good standing.
3. The time between when your statement closes and the due date is known as your grace period. You will not accrue any interest on your purchases during this time.
4. If you pay off the full balance listed on your statement (not just the minimum payment), you will continue to maintain your grace period for the next billing cycle.
5. If you pay less than the full statement balance by your due date, you will begin accruing interest every day on the balance that you carry. Any new purchases you make on the card will also start accruing daily interest immediately.
6. You can lose your grace period for being late on a payment, too.
7. Regaining your grace period usually involves paying your full statement balance for two consecutive months. You can minimize the interest you pay by bringing your balance to $0 as quickly as possible and not making new purchases until you’ve regained your grace period.

Credit Card Grace Period Example

Let’s say your new credit card’s billing cycle is from January 1 through January 31, and your credit card bill is due on February 25, which means your grace period is 25 days long. If you make a purchase on January 23, you won’t have to pay for it at all until February 25. If you pay the full statement balance by that date, you won’t even have to pay interest.

However, if you pay less than your full statement balance by February 25, you’ll start accruing daily interest charges, and your grace period will disappear – not just for the purchase in question, but for all other purchases you have made and will make moving forward, until you’ve fulfilled the issuer’s requirements to regain it.

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How to Regain a Credit Card Grace Period

You can usually regain your credit card’s grace period by paying your full statement balance for two straight months, though some issuers may reinstate it after just one. Until you have done that, you will continue to accrue daily interest charges, both on any balance that’s on your card and any new purchases that you make.

Below, you can see the steps you’ll need to take in order to restore your grace period with some popular credit card issuers.

Steps to Restore Your Credit Card Grace Period With Major Issuers

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You can learn more about how to restore a credit card grace period here on WalletHub.

Does Every Credit Card Have a Grace Period?

No, not every credit card has a grace period, but the vast majority do. Credit cards aren’t required by law to have grace periods, so there are some that don’t include one.

If you want to find out whether a certain credit card has a grace period, you can check its terms and conditions or call the issuer’s customer service.

It’s important to note that while credit cards don’t need to have grace periods, issuers that choose to offer one must make it at least 21 days long.

Grace Periods and the Island Approach

Since credit cards have grace periods, it’s a good idea to have separate credit cards for financing debt and for making everyday purchases. This is an example of a strategy that WalletHub calls the “Island Approach.”

If you carry a balance on a card from month to month, you’ll lose your grace period, and new purchases will start accruing interest right away. But if you have a separate credit card just for everyday purchases that you pay for in full by the end of each grace period, only the balance you’re financing on your other card will accrue interest (unless you have an introductory 0% APR).

This also enables you to focus on getting great rewards with your everyday 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.

How to Make the Most of Your Credit Card Grace Period

You can make the most of your credit card grace period by being strategic about when you make expensive purchases. Buying big-ticket items at the start of your billing period allows you to get the longest interest-free period possible. For example, if you make a purchase on the first day of your billing period, you can potentially get up to 56 days to pay it off without owing any interest (31 days in the month + 25-day grace period).

You can also set up automatic payments for your full balance to ensure that you’re never late and never carry a balance from month to month. Thus, you’ll never owe any interest as long as you have enough money to pay in full for everything you charge.

Finally, you can maximize your grace period by pairing it with a great rewards card. That way, you’re not just saving money on interest, you’re also getting a rebate on part of what you spend!