The best way to maximize your credit card use is to take advantage of its convenience but avoid paying interest on your purchases. To do that, you must understand how a credit card grace period works.
[Read: Best Credit Cards.]
What Is the Grace Period on a Credit Card?
The grace period on a credit card is the time between when a billing cycle ends and the payment is due. The end of the billing cycle is also called the statement date, or when the monthly statement is physically sent or made available online to the cardholder. The payment due date is about three weeks later.
You won’t be charged any interest on the purchases you’ve made within a billing cycle as long as you pay your bill in full before the due date. “If you make full payment, you’ll benefit from an interest-free purchase, not paying a penny more than you paid for the product,” says Bruce McClary, senior vice president of membership and communications for the National Foundation for Credit Counseling, a nonprofit financial counseling organization.
How Long Is the Typical Grace Period for a Credit Card?
Although credit card issuers are not required to offer a grace period, those that do must provide a minimum of 21 days under federal law. Some issuers, like Capital One, offer a grace period of at least 25 days from the end of the billing period. This means cardholders will have at least three weeks to pay off any purchases they made during a billing cycle without interest.
To find your card’s grace period, check the box at the top of your cardholder agreement where fees and the annual percentage rate are listed. Look in the section on “How to Avoid Paying Interest on Purchases” or “Paying Interest.”
The vast majority of credit card users can avoid paying interest if they take advantage of the grace period policy. “I haven’t personally run across a card for people with fair or good credit that doesn’t have a grace period,” says McClary. But, he says, it is less of a given in the subprime market, so be sure to inquire if you’re applying for a card designed for people with poor credit.
But keep in mind that policies often vary by bank, so it’s always wise to reach out to your credit card issuer for clarification.
Can You Lose Your Credit Card Grace Period?
The key rule to understand with grace periods is that they only stay in play if you’re making on-time, full payments each month. “If you carry a balance from one billing cycle to another, that balance is not going to benefit from a grace period,” says McClary. What’s more, any spending you do during that next billing cycle will begin accruing interest from the date of purchase.
Therefore, if you’re not consistently paying your full balance, you can expect that in some months you will pay no interest, while in other months, extra charges will be tacked on. “It could just be a temporary interruption if you’re able to get the account back up to date,” says McClary.
Most issuers restore grace periods after cardholders pay their outstanding balance in full for one or two consecutive months.
When Does a Grace Period Not Apply?
A grace period does not apply to cash advances or balance transfers — only purchases. Those types of transactions will begin accruing interest from the date they are made (with the exception of 0% balance transfer offers).
[Read: Best Balance Transfer Credit Cards.]
How Can You Maximize Your Credit Card Grace Period?
If you time it right, you can actually buy yourself a few extra weeks to pay off a purchase without interest, says Leslie H. Tayne, founder and head attorney at Tayne Law Group, a New York firm that specializes in debt solutions.
The way to do this is to make sure you know your statement date. Then, plan to make your purchase at the start of the next statement window. For example, if your card has a 25-day grace period, this is how the scenario might play out:
— Your billing cycle ends on June 5, and your payment due date is June 30.
— If you purchase something on June 6, that transaction is part of the next billing cycle (ending July 5).
— You will have until July 30 to pay off your purchase in full without being charged interest.
Note that to maximize this benefit, you cannot carry over any balance from the previous month.
Though this method can be helpful, McClary says that the best practice when it comes to credit card spending is to try to have room in your budget to pay in full, no matter when the bill comes due.
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What Is the Grace Period on a Credit Card? originally appeared on usnews.com
Update 04/01/25: This story was previously published at an earlier date and has been updated with new information.
