What Is a Grace Period for Credit Cards?

FT Contributor  | 

A credit card’s grace period is the time between the end of your credit card’s billing cycle, also known as the closing date, and the day when payment is due.

U.S. law requires that all credit card issuers give customers a grace period of at least 21 days.

When you receive your monthly statement from the credit card company, it includes information about the closing date for the billing cycle and the due date for payment related to that billing cycle.

For example, if your billing cycle ends on March 31, your grace period would last until April 21. The payment for the March billing cycle would be due on April 21.

Twenty-one days is the minimum grace period. Some credit card issuers have more extended grace periods.

In addition to knowing when your credit card bill is due, the grace period is significant for another reason. If you pay off your balance in full before the end of the grace period, you do not have to pay interest on any charges that you made during the latest billing cycle.

If you understand the grace period and manage your credit card effectively, you can avoid interest payments, which is like getting loaned money for free.

What Is a Closing Date?

The closing date is the date on which all the transactions you made during the preceding billing cycle get added up by the credit card company.

On the closing date, the issuer will make a statement that includes all the charges that you made during the month. Any purchases that you make after the closing date will get counted as part of the next billing cycle.

The billing cycle ends on the closing date, and the grace period begins on the closing date. The law requires that your payment due date be at least 21 days from the closing date. Most credit card companies put the due date between 21 and 25 days after the closing date.

Understand Your Grace Period

To find out the details of your credit card issuer’s grace period policies, check either the credit card agreement or the credit card statement. Credit card companies publish details about the grace period on their credit card agreement documents, so you can learn these details before you choose a card and open an account. If you do not have a physical copy of the card agreement, card issuers have a copy of the agreement for each of their credit cards on their website.

You can also see the grace period on any credit card statement because those documents have both closing dates and payment due dates.

Avoid Interest

To avoid interest, you need to pay off the entire balance by the end of each grace period. You cannot carry the balance over into the next billing cycle. Any remaining balance will start accruing interest right after the end of the grace period. Some people end up getting trapped in debt because they carry a credit card balance from month to month, and more and more of their monthly payment gets taken up by interest charges.

For some types of transactions, you might not get a full grace period. Balance transfers, cash advances, and checks issued by your credit card company, for example, may not have the same grace period as regular charges. When you make these transactions, you will begin to accrue interest charges the minute they get posted to your account. To avoid interest on cash advances and balance transfers, you need to pay them off immediately; you cannot wait until the end of the grace period.

Extend Your Grace Period

Technically, you cannot extend the grace period because it is part of the credit card company’s policy. However, there are a couple of credit card management tips that can help you get a longer grace period.

One option is to plan to make your purchases right after the closing date for a billing cycle. You will then have almost one month before the end of the billing cycle and at least 21 additional days for the grace period. With the correct timing, you will have at least 50 days before your charges start accruing interest.

Another option is to request a change to your billing cycle or due date. Credit card companies can accept or reject this request, but most are accommodating when it comes to billing changes because it lowers the risk of default. Changing a due date from the beginning of the month or middle of the month to the end of the month could buy you an extra two or three weeks to come up with the money to pay off your credit card balance and avoid interest.

Credit Card Grace Period vs Loan Grace Period

Loans also have a grace period. However, they are somewhat different from credit card grace periods. Rather than coming before the due date, loan grace periods come after the due date. With a loan grace period, you do not get penalized if you do not make a payment by the due date. You have to pay late fees or other penalties if you do not make the payment by the end of the grace period.

Student loans also have a six-month grace period that starts when you graduate. After getting your degree, you have six months before you need to begin making monthly payments on your student loan.

The Grace Periods of Major Credit Issuers

Credit card issuers have different grace period policies. Some put the grace period at 21 days, while others give customers a slightly longer time between closing date and payment due date.

Credit Card Company Grace Period
Capital One 25 days
American Express 25 to 30 days, depending on the card
Citi 23 days
Chase 21 days
Discover 25 days (23 days in February)
Wells Fargo 25 days

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