Credit card grace period is the time period, that is between the end of your billing cycle and your payment due date. This time period is usually between 20 and 25 days, allowing you to make a payment for the prior month’s purchases without accruing any interest on those items.
So this makes the due date that is stated your statement, the time when the grace period ends. After that date, the interest will start accruing ion any unpaid portion of your balance if your APR is greater than 0%.
It is also possible that the grace period is ultimately wiped out in some cases. This happens if you typically carry a balance on your credit card from month to month, and fail to pay your accounts in full.
Let’s take a look at the different types of credit card grace periods:
Full Credit Card Grace Period
A full credit card grace period allows you to carry a balance from prior months and still avoid interest on purchases made during your most recent billing cycle, assuming you pay them off entirely within the 20-25 day window.
The interest will still be charged on the balance that you carry over, but new purchases paid for within the grace period that correspond to the latest billing cycle will be interest free.
A full grace period will be listed as “average daily balance excluding new purchases”, by the credit card issuer. This means that any balance carried over from previous billing cycles accrues interest by way of average daily balance, with new purchases excluded from this computation.
Standard Credit Card Grace Period
Unfortunately, most of the credit card issuers do not use the above-mentioned formula, and charge interest on all purchases immediately if you’ve got a previous outstanding balance.
But this can work like a full grace period, if you pay your credit card in full every month. As long as you make the full statement balance payment within the allotted time designated by the grace period each month, you won’t have to pay any interest.
A standard grace period is listed as “average daily balance including new purchases”, by the credit card issuer. This means that balances carried over from previous months as well as new purchases accrue interest based on the average daily balance computing model.
Thus, any new charges accrue interest immediately and any outstanding balance from a prior billing cycle will essentially eliminate your grace period.
No Credit Card Grace Period
It is also possible that you won’t be offered any grace period at all. Cash advances and convenience checks have no grace period, and so, the interest begins to accumulate the minute you withdraw the funds. Some department store credit cards also have the same rules, so watch out before you opt for one.
It is better if you assume that you do not have a grace period that covers all of your purchases. If you do not know about the type of grace period that applies to you, it is better to contact customer service and have them explain it to you clearly.