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What Is The Grace Period?

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When it comes to credit cards, the grace period is a window of time in which you can avoid paying interest if you pay your balance in full.

It applies to new purchases only and begins on the first day of your billing cycle and lasts about 25 days.
Most issuers offer a grace period on purchases only. Grace periods for cash advances and balance transfers are rare.

According to the CARD Act of 2009, if your card has a grace period, the issuer must send your bill or post it online at least 21 days before the due date so that you have enough time to pay.

This protects you from predatory tactics that don’t give you enough time to pay your bills.


Make the Grace Period Work for You

If you can consistently pay your balance in full, the grace period is a tremendous chance to save money and earn rewards.

Say, for example, that you get a new credit card that carries a 20% annual percentage rate (APR). You find some things you really like and charge $1,500 during your first billing cycle.

If you can pay that $1,500 back during the grace period, then you owe $0 in interest.

But what if something comes up and you can’t pay back the $1,500 right away?

You will be charged an annualized 20% on that balance, which amounts to interest payments of $25 every month. If it takes you a year to pay your balance, you’ll pay $300 worth of interest payments.

Why? Do you need that many credit cards?

Yes and no. It’s generally a good idea to carry multiple credit cards if you can afford it.

With multiple credit cards, you can maximize rewards by tailoring each card to your spending habits and also help finance significant expenses in your life.