The best way to maximize your credit card usage 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.
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, vice president of communications for the National Foundation for Credit Counseling, a nonprofit financial counseling organization.
Grace periods for revolving credit accounts like a credit card shouldn’t be confused with grace periods on other financial products like loans, says Leslie H. Tayne, founder and head attorney at Tayne Law Group, a New York firm that specializes in debt solutions. “It’s not like with a mortgage statement where the payment is due on the 1st and you have until the 15th to pay,” she says. The due date listed on your card statement is the deadline when you must pay your bill.
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. That means cardholders will have at least three weeks to pay off any purchases they made during a billing cycle, and if they do, they can avoid interest.
Typical credit card grace periods range between 21 and 25 days. Capital One cards, for example, offer at least 25 days from the end of the billing period, while the Chase Freedom Unlimited card offers 21 days.
To find your card’s grace period, check the box at the top of your cardholder agreement where fees and annual percentage rate are listed. In the section on “paying interest,” it will say something like: “Your due date will be a minimum of 21 days after the close of each billing cycle. We will not charge you interest on purchases if you pay your entire balance by the due date each month. We will begin charging interest on balance transfers and cash advances on the transaction date.”
If reading fine print isn’t something you want to do, just call your credit card issuer and ask, says Tayne. Since policies often vary by bank and issuer, it’s always wise to reach out to customer service when you need clarification.
The good news is 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.
In that case, in the credit card agreement under “paying interest,” it will say something like: “There is no grace period on this account. We will begin charging interest on purchases and cash advances on the transaction date.”
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.
The other thing to be aware of is that the 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).
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 Tayne.
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. Say, for example, your card has a 25-day grace period. Here’s how this 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 in order 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 make sure you have room in your budget to pay in full, no matter when the bill comes due.