Grace Period
A grace period is a window of time after a bill is due during which you can pay without penalty or additional charges. For credit cards, the grace period (typically 21–25 days) is the time between statement closing and the payment due date — during which no interest accrues on new purchases.
Credit card grace periods are one of the most valuable but least understood features. If you pay your full statement balance by the due date every month, you never pay interest on purchases — effectively getting a free 21–55 day loan on everything you buy.
You lose the grace period if you carry a balance from month to month. Once interest starts accruing, it applies to new purchases immediately (no grace period until you pay to zero). This is why it is so expensive to carry a credit card balance.
Grace periods also exist on student loans (typically 6 months after graduation before payments begin), and some mortgages (a window after the due date before a late fee is charged, typically 15 days).
Related terms
- Minimum Payment
- The minimum payment is the smallest amount a credit card issuer requires you to pay each month to keep your account in good standing. Paying only the minimum is extremely expensive: most of the payment covers interest, leaving the principal nearly unchanged.
- Balance Transfer
- A balance transfer moves existing credit card debt to a new card, typically at a 0% promotional APR for 12–21 months. It can save significant interest if the full balance is paid before the promotional period ends.
- Credit Score
- A credit score is a three-digit number (typically 300–850) that summarises your credit history. Higher scores mean lower borrowing costs — a higher score on a mortgage can save tens of thousands of dollars over the loan's life.