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If you often find yourself paying interest on your credit card purchases you need to learn about credit card grace periods. You can find out the details, and if your credit card has a grace period, in the Terms & Conditions portion of your credit card bill. Understanding the details of your credit card grace period can save you money on interest as you can time your credit card purchases to your advantage.
What is a grace period?
A credit card grace period is the amount of time after you make a purchase on your credit card before the credit card company starts charging interest on that purchase. In other words, the grace period spans from the last day of the billing cycle until your next payment due date. When you pay your balance before the payment due date, you won’t incur any interest. If the grace period isn’t spelled out clearly on the bill, you can find the length of the grace period by subtracting the due date from the “statement date” on your bill.
Does every credit card offer a grace period?
Not every credit card offers a grace period. However, the CARD Act of 2009 says that creditors must give customers at least 21 days from the statement closing date to pay their bill. Whether those 21 days are interest-free, or not, depends on the credit card provider. If a grace period exists, however, it must be at least 21 days.
Because of this law, most major credit cards have a grace period of 21 to 25 days to stay competitive. But don’t assume every card you carry has a grace period. Compare some top-tier credit cards, their grace periods, and their APRs in the table below to see how terms can vary.
|Credit Card Name||Grace Period||Purchase APR*|
|Chase Freedom Unlimited®||21 days||16.74% to 25.49%|
|Discover it® Cash Back||25 days (23 in February)||13.99% to 24.99%|
|Citi® Double Cash Card||23 days||15.74% to 25.74%|
|Capital One® Quicksilver®||25 days||14.74% – 24.74%|
*Variable. Depending on creditworthiness.
How to leverage the grace period to save money
At a minimum, a grace period can give you an interest-free loan for three weeks as long as you pay your balance in full when the bill is due. Being mindful of grace periods and your statement closing dates can help you save hundreds of dollars a month on interest if you don’t carry a balance on your card. This is especially helpful if you are using your credit card for a big purchase.
If you can wait until the start of a new billing cycle to make the purchase, you’ll have until the end of the next billing cycle – often as long as six weeks – to pay off that purchase with no interest.
Combine grace periods and credit card rewards to earn what you deserve
Grace periods are especially helpful if you use a cash back or rewards credit card. If you don’t leverage the grace period on a rewards card and end up paying interest charges, those generous rewards points or cash back could be offset, partially or completely, by the interest charges.
Let’s say you earn 1% cash back on a $100 purchase, or $1. If you don’t have a grace period on a credit card with a 16% APR – perhaps because you’re carrying a balance – you’d pay approximately $1.20 in interest the first month, which totally negates anything you have earned in rewards.
What smart consumers should know about credit card grace periods
Grace periods sound like a great way to use your credit card for an interest-free loan and get the most value out of your rewards. They can definitely make it easier to budget for big purchases. But they only work if you pay off your balance in full each month. If you carry even a small balance, you will be charged interest on the existing balance plus any new purchases you make on the card, beginning on the day of purchase. If you know that you will be making a lot of big purchases over the next 12 months – maybe you’re furnishing a new house – you might want to consider a 0% purchase APR card for some added payment flexibility.
Additionally, most credit cards do not have grace periods for balance transfers or cash advances. If you use your card for a balance transfer or cash advance, it will eliminate the grace period for any purchases you make that month using the card. It’s best to avoid cash advances and only transfer a balance if a credit card offers a 0% balance transfer APR deal.
Getting back into good graces
If you carry a balance past the due date, any charges made that after the statement closing date will be charged interest. You’ll need to pay the full balance, including new charges, by the next due date to enjoy a grace period for future purchases.
Why we love grace periods
Credit card grace periods make it easier to budget, help ensure you’re getting the most value from your credit card rewards and afford you the convenience of paying by credit without the hassle and expense of interest charges.