Credit Card Grace Period
Credit cards provide an easy and convenient way for paying for goods and services even when you don’t have cash. While you may have credit cards for years, you may not know how long the credit card grace period is unless you are extremely careful. Are you aware that you can make purchases beyond the billing period and not incur interest charges? Understanding the grace period and what it entails is essential for every credit card holder. It helps you to take advantage of the benefits and avoid unnecessary interest charges and penalties for late payments. Read on for valuable details about the grace period on your credit cards, what it entails, and how you can maximize its benefits.
What is Credit Card Grace Period?
Credit card grace period refers to the period between the end of the billing cycle and the date the next payment is due. During this time, the credit card company allows you to pay the credit card bill without interest. The grace period can be anything between 21 and 25 days depending on the provider. Longer periods are better as they allow you more time to pay off the balance without incurring interest. Credit card companies aren’t required to offer grace periods to their clients. It is a reward or incentive that encourages you to pay off your balance in full. And you should take advantage of this incentive.
How Does the Grace Period Work?
As aforementioned, the credit card grace period starts at the end of the billing cycle and runs up to the next payment’s due date. The day of the end of the billing cycle is also referred to as the closing or statement date. This is when the issuer compiles all the transactions made during the preceding period and prepares them for billing. Any purchases made after this date appear on the next month’s bill. If you pay the balance off in full between the statement date and the payment due date, there will be no interest charges.
Here is one way you use your grace period. For example, you purchase a $400 refrigerator using your credit card on 3rd August. The billing cycle closes on 23rd August, and the payment is due on 7th September. If you don’t have an outstanding balance and pay the $400 on or before 5th September, the next bill will reflect a beginning balance of zero. There will be no finance charges or interest for paying beyond the due date which is 23rd August. Since billing dates vary for different users, you should pay attention to the statement date and the payment due date. The grace period on your credit cards occurs in between the two dates
Limitations of Credit Card Grace Period
The credit card grace period has several limitations that you should know. This is to ensure that you do not end up paying interest or extra fees due to misinformation. First, credit card ATM cash advances and balance transfers don’t have grace periods the way credit purchases do. If you use the credit card for these transactions, you will still be charged interest on them. An example of such operations is foreign currency cash advances.
If you start a billing cycle with a balance other than zero, there will be no credit card grace period on new purchases. For instance, if your next bill reflects a balance of $100, you will still pay interest on new purchases. This is regardless of whether the full amounts are paid before the next due date. For this reason, you should always ensure that the bill reads zero balance so as to enjoy these benefits for the following month.
The grace period on your credit cards only applies to balances that are paid in full before the next due date. If you only pay the minimum payment due, you will still incur additional charges. There will be interest fees for the unpaid balance plus new purchases made during the month. If you have balances, you should pay them so as to take advantage of the grace period.
How to Best Use the Grace Period on Your Credit Cards and Avoid Interest Charges
There are times when you have urgent needs that cannot wait. For instance, you may want to fix your HVAC system before the winter or replace your vehicle’s dead battery. In such cases, utilizing your credit card without stopping to assess the grace period is understandable. However, when making planned purchases, you should take advantage of the credit card grace period. For example, you may have a business trip coming up. You can strategically schedule the plane ticket’s purchase so that you have a longer period beyond the grace period.
If you make a big purchase immediately after the billing period, you will have close to a month before the transaction shows up on the bill. You will then have a grace period for the purchase after that. In this case, if the statement date is on July 23rd, you can buy the ticket on 24th July. The following month’s billing cycle will close on the August 23rd, and you will have a grace period after that. If you have a 21-days grace period, the transaction will be due on the September 16th. You will have a longer time to pay off the balance in full without interest.
Mum’s the Word On Credit Card Grace Periods – Your Credit Card Company will not actively promote the grace period on your credit cards. They Have “No Interest”!
Credit card providers do not enlighten you on grace period or how to take advantage of it. While it incentivizes clients to pay off balances in full, it means that they do not collect interest. For this reason, you need to find ways to ensure that you are getting the best out of it. Analyze your bill and schedule the big purchases for immediately after the statement date. This way, you will get more time to pay off the balance without using your savings. Also, always avoid carrying balances forward as this will hinder you from enjoying the benefits of the credit card grace period. With these vital pieces of information on credit cards, all you need is to apply this knowledge and be better placed to get the best out of your card.
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