Grace Period
Quick Answer
A grace period is the time between the end of a billing cycle and the payment due date during which no interest is charged on new purchases.
Definition
A grace period is the time between the end of a billing cycle and the payment due date during which no interest is charged on new purchases.
Explanation
Credit card grace periods are typically 21-25 days. If you pay your statement balance in full by the due date, you pay no interest on purchases. If you carry any balance forward, the grace period disappears and interest accrues from the transaction date.
Using the grace period effectively means you can borrow money interest-free for up to 55 days (statement period + grace period). This is one of the key benefits of credit cards when used responsibly.
Example
A statement closes on May 1 with a $1,000 balance. The due date is May 25. Paying by May 25 means no interest. Paying $999 on May 25 means interest on the full $1,000 from the purchase date.
Frequently Asked Questions
What is Grace Period?
A grace period is the time between the end of a billing cycle and the payment due date during which no interest is charged on new purchases.
How does Grace Period work?
Credit card grace periods are typically 21-25 days. If you pay your statement balance in full by the due date, you pay no interest on purchases. If you carry any balance forward, the grace period disappears and interest accrues from the transaction date.Using the grace period effectively means you can borrow money interest-free for up to 55 days (statement period + grace period). This is one of the key benefits of credit cards when used responsibly.
Can you give an example of Grace Period?
A statement closes on May 1 with a $1,000 balance. The due date is May 25. Paying by May 25 means no interest. Paying $999 on May 25 means interest on the full $1,000 from the purchase date.
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