How to use your credit card grace period to avoid paying interest

4 min read

Nobody likes paying credit card interest. Luckily, most credit cards come with a built-in feature that cardholders can use to pay off their balances interest-free: the grace period. Thanks to the Credit CARD Act of 2009, lenders are legally required to give cardholders a minimum of 21 days between the end of their monthly billing cycle and their bill due date. Most major credit cards count those 21 days as a grace period, and do not begin charging interest on that billing cycle’s balance until the grace period is over.

Credit card interest rates can catapult your balance from manageable to overwhelming — which is why paying off your monthly statement balances in full within your grace period is one of the best ways to avoid getting into credit card debt. Plus, as long as you pay off your balance before your grace period expires, you’ll be able to make purchases on your credit card without paying interest. That’s a win-win.

Here’s what you need to know about grace periods, including how they work, how long they usually last and whether you can lose a grace period if you don’t pay off your balance in full.

What is the grace period on a credit card?

A credit card grace period refers to the amount of time you can carry a balance before being charged interest on that balance. Credit cards are not required to offer grace periods, but most credit card issuers provide grace periods to lenders — check your credit card’s rate and fee information to learn what your issuer offers.

In most cases, a grace period on a credit card will be framed something like this: “Your due date is at least 21 days after the close of your billing cycle. We will not charge you interest on new purchases if you pay your balance in full by the due date every month.” Pay attention to the wording: if you do not pay off your statement balance in full by the due date, the credit card issuer will begin charging interest on both your unpaid balance and new purchases. If you do pay off your balance in full, new purchases will not be charged interest — unless, of course, you are unable to pay them off before their grace period expires.

As long as you stay on top of your credit card balances, you can charge new purchases to your credit card and pay them off without paying interest. Once your grace period ends, both unpaid balances and new balances will begin to accrue interest according to your credit card’s APR, or annual percentage rate. Certain types of transactions, such as cash advances, are not subject to a grace period and will start accruing interest as soon as the transaction completes.

What is a typical grace period for a credit card?

The Credit CARD Act of 2009 states that creditors must give consumers a minimum of 21 days to pay off their monthly statement balances. This means you have at least 21 days between your statement closing and when your bill is due.

Most major credit cards make their grace periods at least 21 days long, to give cardholders a chance to pay off their statement balances interest-free. In fact, some of the best credit cards offer grace periods of 25 days or longer. However, some credit cards do not offer grace periods — or only offer very short grace periods. Pay attention to the fine print so you know exactly how many days you have to pay off your balance before incurring interest charges.

How to use a grace period to avoid interest?

The best way to use a grace period to avoid interest is to pay your statement balance in full, on time, every month. If your credit card offers a grace period, the amount of money listed on your credit card statement will still be within its grace period when your bill is due. Pay the total amount on time, and you will not have to pay interest on your statement balance. Make a smaller payment, and the remaining amount will begin to accrue interest — as will any new purchases charged to the card.

You do not need to pay off your total credit card balance every month; just the balance on your statement. Any new charges added to your credit card after your statement closes will be included on your next statement and can be paid off then.

Can you lose a grace period on a credit card?

If you do not pay off your statement balance in full before your grace period ends, you will lose the grace period on your credit card. This means that both your current balance and any new purchases will begin accruing interest immediately. You will no longer have any grace period in which you can pay off your purchases interest-free.

However, you can earn your grace period back. Once you begin to pay off your balances in full again, your credit card issuer is likely to reinstate your grace period. This means that the next time you charge purchases to your card, you’ll once again have a grace period during which you can pay off your statement balance without paying interest. It might take a few billing cycles before your grace period returns, so keep paying off your statement balance in full until you’ve earned back your grace period.

Why am I getting charged interest on my credit card?

If you are getting charged interest on your credit card, it means you are carrying a balance that is not covered by a grace period. Maybe your credit card does not offer a grace period, or maybe you did not pay off your balance before the grace period ended. Either way, it’s a good idea to pay off any balance that accrues interest as quickly as possible.

If you’d like to avoid paying interest on your credit card, you have two options. You can pay off your balance before your grace period ends, or you can apply for a zero interest credit card that offers 0% APR on purchases for up to 15 months. Read our guide to credit card interest to learn more about how credit card interest works, and remember that credit card interest compounds — which means that if you want to stay out of credit card debt, you should take advantage of your grace periods.