Grace periods on credit cards are the amount of time a creditor gives a customer to pay off a purchase before they start charging interest.
The amount of time given varies from account to account, but most grace periods are between 20 and 25 days. This isn't always the case, and there are many times when there is no grace period.
There are many different kinds of grace periods.
Partial Grace Period
The average daily balance method is used to figure out interest charges during this type of grace period, and new purchases are included provisionally. If the balance from the last billing cycle wasn't paid in full, interest starts to be charged on new purchases right away. There is no grace period. If the consumer paid off their entire balance during their last billing cycle, interest won't be added to their new purchases until their next billing cycle.
Full Grace Period
The average daily balance method is also used to figure out interest during this grace period, but new purchases are not included. This is very important, because it means that finance charges won't be added to any new purchases until the billing cycle after the new purchase. This gives the customer a full billing cycle grace period, and if they pay off the balance, they won't be charged any interest.
No Grace Period
Some credit cards don't even have a grace period. These use a method called "Average Daily Balance" to figure out finance charges, which takes into account new purchases. This means that interest is charged at the time of purchase and is immediately added to the daily average. Even if you paid off your whole previous balance, this interest is still added.
Cards that don't have a grace period aren't as common as the others, but when you apply, pay close attention to the terms and conditions. Look for the words "average daily balance, including new purchases," and see if there is a date range for how interest is calculated.
The grace periods are written in the terms and conditions of all credit card applications. Most of the time, you can find them under a heading that says "Grace Period for Repayment of Purchase Balances." This is written this way because cash advances don't come with grace periods. Interest is added to a cash advance as soon as it is taken out. Balance transfers, if they have any, also have their own grace periods, which are listed under a separate heading.
On the back of your monthly statement, you can find out how long your grace period is for your current credit card. You can also find this information on the website of your creditor, but be sure to look at the right offer. If you have any questions, call your credit card company. The best way to be sure is to do this.
Grace periods for credit cards aren't always the same, and sometimes there isn't even one. This article will talk about some of the most common grace periods.
