Chris Bridges, Founder and CEO, VITAL Card Inc.
If you’re new to the credit card world, you may not be familiar with the term “grace period.” Generally, a grace period on a credit card is the time between when a bill is sent and when it’s due.
Yet, most companies still have this unwritten rule in place.
In fact, in many cases, it’s not an unwritten rule at all. It’s a rule that users sign when they first get the card.
Take a look at this explanation of credit cards and their grace period and how you can use this feature to your advantage as a new or experienced credit card user alike.
What’s a Credit Card Grace Period?
The grace period concept varies greatly from company to company. There is no set rule of thumb for the existence of a grace period. There are, however, some key elements that determine what a grace period is.
No interest will hit your account during this time, so long as the due amount is paid in full by the listed due date.
It’s also worth mentioning that purchases made after a billing cycle will not be due until the following month. It will be included in your next bill.
A credit card company will not charge you interest for not paying your bill during this time. It’s a time of “grace” wherein you can gather finances, offset bills that are due, or simply take your time paying your bill.
Only once the due date comes is the interest added to your account for any unpaid funds left on your credit card account.
When Interest Rates Spike
Remember that credit cards are notorious for charging high APRs (usually 10 to 30 percent, yikes!), so the interest usually hits hard.
In contrast, if you are within an introductory period where no interest is charged, you still must pay the minimum amount due by the listed date. Or, in the case that a bill is not paid at all, you will get a late fee in addition to your APR hitting the account.
Your card will likely be frozen, and you’ll be unable to use it as well. As an added hit, the late fee may be reported to credit bureaus and cause your credit to take a hit.
In other words, it’s best to pay your credit card on time for many reasons. However, you can use the grace period to your full advantage. It allows you to stretch out payment before any of those pesky fees come due and are added to your account.
Are Credit Cards Required to Offer a Grace Period?
No, credit cards do not have to provide their customers with a grace period until their payment is due. Forbes notes that, for those companies that do offer a grace period, being mindful of it is the key.
Be Aware Of Your Credit Card’s Policies
Be aware that some credit cards don’t offer a grace period. They simply send a bill or a warning about an upcoming bill, and it’s due right then and there.
This all depends on the credit card company and when they expect their invoices to be paid.
You will be given this information before signing up with a credit card company. So you won’t get any nasty surprises like a bill that’s suddenly due on your credit card account.
Why Credit Cards Offer a Grace Period
Of course, it’s unrealistic to always expect customers to pay on the day. That’s why most companies provide this grace period.
Besides, it’s a nice perk, especially when the period is a long one. It gives customers time to plan how they’ll pay, how much they will pay, and more.
It’s especially nice if the grace period is a long one so that customers can offset the payment with their other bills that may be due.
However, informed credit card users should be aware of what they are spending and approximately how much is due.
It’s never a good surprise to not know how much you owe at the end of a billing period.
Remember how much you spend and check your online credit card account frequently to avoid any unpleasant surprises and ensure all the purchases on your account are yours.
How Long Are Credit Card Grace Periods?
The length of your credit card’s grace period (if it exists) will be up to the credit card company themselves.
The grace period isn’t treated so much as a perk to the customer as it is a reflection of how they do their billing and payment options.
Therefore, each credit company’s grace period is likely to vary greatly—most average around a month-long.
Understanding The Billing Cycle
As a bill is sent out at the end of the month, it’s due around that time the following month.
If the invoice comes at the beginning of the month, it will come due at the beginning of the next month, and so on.
NerdWallet explains that if you pay your full balance by your due date, you will not owe interest for that billing cycle. Understanding your billing cycle is central to getting the grace period’s benefits.
Others sit around three weeks, or 21 days, while some are shorter yet. Then there are credit card companies with extremely long grace periods.
Read The Fine Print
As mentioned, timelines are far from a rule; each has its own fine print as to how long an invoice will exist before it’s due.
To learn the specifics of your credit company’s grace period, read the fine print. You can also ask questions to understand what you are getting into before you apply.
To some, a grace period is extremely important so they can figure out how to arrange their money and have all of their bills paid on time.
For others, it’s less important. The latter is true if you plan to use your credit card infrequently or won’t pay it in full.
Determine if this is something that’s important to you and your finances as a new credit card user.
It can help you make an informed decision if you are moving forward with the right credit card company for your personal finance goals.
If nothing else, a grace period won’t hurt anything. You can still pay your bill early; there are no penalties for early payments.
Simply ignore the due date and pay on receipt. Easy and paid in full. In fact, credit card companies will appreciate you doing so.
It can get you in their good graces and add to even more perks. However, this can be true of any customer who pays on time and in large chunks, if not the full amount in its entirety.
Should You Utilize a Grace Period On Your Credit Card?
This is a question that operates on a case-by-case basis. Everyone’s financial situation will be extremely different.
Besides, there are people who use their credit cards for everything, then pay it off in full when due. If this sounds familiar, you may need to pay off the bill sooner rather than later to free up available credit.
Users will also need to take a look at when other bills are due and how much money they have available to pay additional bills.
Take a look at what needs to be paid and when to help make this decision easier for you and your spending habits.
Remember, while minimum payments are an option, they can cause interest rates to spike quickly. Consider paying as much as possible to avoid these additional fees.
In any case, make a note of the due date when you first receive your credit card statement in order to ensure the bill is paid on time.
Avoid dragging your feet (especially if you can afford it), which could cause an accidental default.
Grace Period on Credit Card Recap
Most credit card companies offer a grace period between when they issue their statement on how much is due vs. when the money is actually due.
Credit card users will not face any penalty fees or interest charges during that time. Only after the due date can the remaining amounts due incur interest.
This is not a requirement of credit card companies but rather a way to handle billing properly while essentially throwing their customers a bone.
However, credit card users shouldn’t be shocked by their bills. Diligent spenders should have a good idea as to how much they’ve spent, and therefore, how much will be due.
What’s more, is that paying on time can also prevent future charges from upping your credit card statement even further.
Take note of your credit card company’s grace period to avoid future surprises and to better schedule your billing calendar.
To learn more about how to take advantage of your grace period and allow your finances to work in your favor. Sign up for VITAL Card, the credit card that pays your to share and spend responsibly, to get access to our credit-scaling in-app tools. Earn rewards when you cross a credit score milestone.
“How To Use Your Grace Period To Avoid Paying Interest,” Bankrate.com
“How Credit Card Grace Periods Work,” Nerdwallet