Credit card grace period

What It Means

A credit card grace period is the stretch, usually from the end of a billing cycle to the payment due date, when you can pay off purchases without being charged interestInterest rateThe yearly percentage a lender charges for borrowing money, not counting fees; the APR adds certain fees to show a fuller cost. See more. It works only when you pay the statement's full balance by the due date, and it generally covers purchases, not cash advancesCash advance(1) Cash borrowed against a credit card's limit, which usually costs a fee plus interest from day one; (2) a small advance on your pay from an app. See more. Federal law doesn't require card companies to offer one, but the CFPB notes most cards do for purchases. Leave part of the balance unpaid and you lose it: interest is charged on what's left and on new purchases from the day you make them.

How People Say It

• "Pay the statement in full and there's no interest."
• "I carried a balance, so I lost the grace period."
• "Why is there interest on a purchase I made last week?"

The Breakdown

A short example. Maya's card statement closes on June 5 with a $640 balance, due June 30. She paid May's statement in full, so she has a grace period. On June 12 she buys $180 of groceries, which will land on the July 5 statement.

Where it goes wrong. If Maya pays the whole $640 by June 30, those purchases never collect interest, and the $180 gets its own grace period on the next statement. If she pays $400 instead, the grace period is gone: interest is charged on the $240 left over, and on the $180 of groceries from June 12, the day she bought them. Paying the next statement in full doesn't always wipe the slate clean either. Experian explains that residual interest can build between the statement dateStatement dateThe day a credit card's billing cycle closes and the statement balance is set; the due date comes afterward. See more and the day your payment arrives, so a small interest charge can show up one more month.

What to watch for

• Pay the statement balanceStatement balanceWhat you owed on a credit card when the billing cycle closed, as printed on that month's statement. See more, not only the minimum, if you want to keep the grace period.
• Don't count on one for cash advances; interest on those generally starts the day you take the cash.
• Check your cardholder agreement for how to get a lost grace period back.

Good to Know

Regulation Z (12 CFR 1026.5) requires card companies to mail or deliver your statement at least 21 days before the payment due date, and where a grace period is offered, at least 21 days before it ends. When you do lose a grace period, Regulation Z (12 CFR 1026.54) limits the damage: the card company can't charge interest on balances from days in earlier billing cycles, or on the part of the balance you repaid within the grace period. The CFPB's page on grace periods is a clear plain-language guide if your card's terms are unclear.

Related Terms and Categories

• Statement balance

  What you owed on a credit card when the billing cycle closed, as printed on that month's statement.

• Statement date

  The day a credit card's billing cycle closes and the statement balance is set; the due date comes afterward.

• Current balance

  The total you owe on a credit card right now, including charges and payments made since your last statement.

• Cash advance

  (1) Cash borrowed against a credit card's limit, which usually costs a fee plus interest from day one; (2) a small advance on your pay from an app.

• Late payment

  A payment that reaches the lender after its due date; on credit reports, one that's 30 days or more past due.

Debt and credit