Did you know that you can receive a short-term loan from the bank without paying any interest? It may sound too good to be true, but it’s possible with the best credit cards. The catch is that you need to pay back the money by the end of your credit card’s “grace period.”
How Does the Credit Card Grace Period Work?
Your credit card’s grace period is based on two things: your statement closing date and your payment due date. Your statement closing date is the last day of each billing period when you receive a summary of your activity. It’s not necessarily the last day of the month, as the billing cycle’s dates are determined by the bank.
On the other hand, your payment due date comes at least 21 days after your account’s closing date. During this time, you must make at least the minimum payment to avoid being delinquent. If you completely pay off your previous statement balance by the due date, you can carry a balance for any purchases during the next billing cycle without incurring any interest.
Do All Credit Cards Offer a Grace Period?
While most credit cards do offer a grace period, it’s not mandatory for all. Major banks like Chase, Capital One, and Citi provide grace periods as a courtesy and incentive to use their products. However, some less popular or credit-building cards may not extend a grace period. You can check if your card offers a grace period by reviewing its pricing and terms.
Eligibility Criteria for a Credit Card Grace Period
Even if your credit card offers a grace period, you must meet certain requirements to benefit from it. You need to pay the balance of your previous billing cycle in full by the payment due date, and your account must be in good standing. Additionally, cash advances do not have a grace period and immediately start accruing interest.
What Happens if You Don’t Pay Your Full Balance After the Grace Period?
If you don’t pay your full statement balance by the due date, the credit card issuer will revoke your grace period and start charging interest on your remaining balance and new purchases. This could result in significant fees. Even if you catch up on your payments, it may take several months of on-time, full payments to reinstate the grace period.
How to Double Your Grace Period
While you can’t technically extend your credit card’s grace period, you can time your purchases to avoid interest charges for nearly two months. If your billing cycle ends on the fifth day of the month, you can make a large purchase on the sixth day. This purchase won’t appear on your statement until the following month, allowing you to benefit from the grace period.
Remember that keeping a large balance on your credit card may affect your credit utilization and potentially decrease your credit score.
Pay Your Statement Balance in Full to Avoid Interest Charges
Most credit cards offer a grace period to pay off your bill. As long as you pay your statement balance in full each month by the payment due date, you won’t be subject to high APR charges.
Frequently Asked Questions (FAQs)
How do I verify the grace period on my credit card?
To check if your credit card offers a grace period, review the details under “interest rates and interest charges” in your card’s terms. Look for a section labeled “Paying Interest” or “How to Avoid Paying Interest,” which should outline your grace period.
Do credit card cash advances get a grace period?
Cash advances do not receive a grace period. They start accruing interest immediately, often at a higher rate than normal purchases. Cash advances also incur fees, so it’s best to avoid them if possible.
How long is a typical credit card grace period?
Grace periods are typically at least 21 days long, as credit card issuers must legally provide a bill at least 21 days before charging fees. Some issuers may offer grace periods of up to 30 days, but most stick to the minimum requirement.
Remember, understanding and utilizing your credit card’s grace period can be a valuable financial tool. Make sure to pay attention to the terms and conditions of your specific card to maximize its benefits. For more personal finance insights, visit Personal Finances Blog.