What to Know About Credit Card Grace Periods
March 26, 2021
According to Section 163 (Timing of Payments) of the CARD Act of 2009:
“A creditor may not treat a payment on an open end consumer credit plan as late for any purpose, unless the creditor has adopted reasonable procedures designed to ensure that each periodic statement including the information required by section 127(b) is mailed or delivered to the consumer not later than 21 days before the payment due date.”
This means that you, as a credit card consumer, have at least 21 days for your payment to be received by the credit card issuer after your billing cycle closes and your bill is made available to you. So, for example, if your billing cycle closes on the last day of the month and is made available on that day by your credit card issuer, your payment due date cannot, by law, be sooner than the 21st of the following month. This doesn’t mean you can’t pay your bill sooner than the 21st; you certainly may. However, your credit card issuer cannot count your payment as late until at least 21 days have passed from when your bill was made available to you and they haven’t received at least the minimum amount due from you.
Many—but not all—credit card issuers offer their card members what’s known as a “grace period.” Having a grace period means that you will not be charged interest on an outstanding balance for purchases made with your credit card so long as you make your payment on time—as in it is received by the card issuer within the at-least-21-day window described above. However, there are two conditions that typically must also be met in order for a grace period to apply:
What having a grace period on your credit card essentially means is that you have the ability to make purchases with that card interest-free. So, you can take advantage of the convenience and other potential benefits of a credit card without having to pay interest on your purchases. So long as you keep getting your payments for the entire balance owed in on time each and every month, which is entirely up to you.
Having a grace period does not mean that a credit card is free. There may still be an annual fee and/or other fees associated with your particular credit card. But it does mean, so long as you get your payments for the full amount due in on time, every time, you can expect not to pay any interest for using that credit card—for purchases, anyway.
By the way, not all credit card transactions necessarily qualify for a grace period; it’s typically confined to purchases. For example, a cash advance made with a credit card may not have a grace period and may be subject to a higher interest rate and other fees a regular credit card purchase is not.
Also, if you do a balance transfer from one credit card to another, you may lose the grace period on the card to which you transferred the balance. That’s because, if you did the transfer to pay off the balance over time at a lower interest rate, you’re still paying it off over time—as in carrying a balance from one billing cycle to the next, which may negate the card’s grace period.
Providing card members with a grace period is not required by law. You’ll know your credit card does not have a grace period if your card had a zero balance at the beginning of your billing cycle, you pay your card balance in full by the due date, and are still charged interest on your purchases.
But you don’t have to wait until that happens to know if your credit card offers a grace period. By law, credit card issuers are required to disclose the period purchases may be repaid without any finance charges being incurred in an easy-to-read, highly visible section of their cardholder agreement called a Schumer box. So, you should know whether a credit card offers a grace period before even applying.
By taking advantage of a credit card’s grace period, you can use a credit card to finance purchases short term without incurring any interest charges. How long that term is depends on when you make the charge. For example, if you make a $100 purchase on the first day of your billing cycle, you technically wouldn’t have to pay that purchase back for over 50 days (30 days of the billing cycle + 21 days until the payment is due) and still incur no interest charges, so long as you pay the entire balance due.
By using a credit card with a grace period strategically, you can spread purchases out and still get items you want or need interest-free. You just have to make sure you pay your balance in full each and every month.
Ready to see if you Pre-Qualify for a Credit One Bank card with a grace period? It takes less than a minute and won’t harm your credit score!
After realizing he couldn’t pay back his outrageous film school student loans with rejection notices from Hollywood studios, Sean focused his screenwriting skills on scripting corporate videos. Videos led to marketing communications, which led to articles and, before he knew it, Sean was making a living as a writer. He continues to do so today by leveraging his expertise in credit, financial planning, wealth-building, and living your best life for Credit One Bank.
Three little letters can significantly influence your finances: A…P…R. This often misunderstood acronym stands for “Annual Percentage Rate” and represents the cost of borrowing money.
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No, this is not an article about the golden ratio that’s so prevalent in nature and architecture. There will be no dissecting the number phi (φ) or explaining the Fibonacci sequence or diving into any other mysterious-sounding terms you may have heard in blockbuster thrillers about searching for hidden meanings in Renaissance works of art.