All You Need to Know About Credit Card Grace Periods

Nowadays, people are very much into cashless transactions, which means either using debit cards, credit cards, or wallets. But among these, a credit card is the second-most popular choice as it lets you borrow money in advance, which you can repay later through EMI (Easy Monthly Installments). However, handling a credit card isn't that easy, and there are things you must know before getting yourself one. So, let us discuss one such topic that not many know about: the credit card grace period.

The time between the end of the billing cycle and the date of your payment that is due is referred to as the grace period. During this period, as long as you pay your bill in full by the due date, you are not charged any interest. Grace period for credit card payment is not compulsorily offered by credit card companies. But most of the companies still provide one on purchases.

If you are granted a grace period for credit card payment and have no balance, you can simply avoid paying the interest charges on new/fresh purchases by paying your balance in full by the due date. If you don't pay your balance until the credit card grace period after the due date, you lose your grace period and need to pay interest on the unpaid portion of the balance.

Furthermore, you also have to pay interest charges on the new billing cycle starting on the date of new purchases as a penalty if you make any late credit card payment. Grace period mainly applies to purchases or transactions made on credit cards. If you use your credit card for advance cash then you have to start paying interest from the date of the transaction itself.

The credit card grace period is important as you save a noticeable amount of money every year with the help of a grace period for credit card payment. After the due date, you only rack up unnecessary interest on your transactions.

As a credit card user, certain points need to be cleared and remembered about the grace period for credit card payment after the due date. Important aspects about the grace period for credit card payments are as follows:

• The grace period is the period between the end of the billing cycle and the due date of the bill payment. The grace period is only interest-free when you pay your bills on time. 

• If your credit card carries a balance from the last billing cycle, there is zero chance of enjoying the leverage of grace period as there is no credit card grace period after the due date.

• If you do not pay your bills before the due date, then you have to pay interest charges on the next purchases and carry it to the next billing cycle as well. 

• Credit card companies or banks don't compulsorily provide you with a grace period. However, most of these financial institutions in India still provide a grace period of 20-60 days, which can be called an interest-free period. It is actually to help those who struggle to pay back the bill payment on time and avoid late credit card payment.

• Grace period is only for purchase transactions, so if you use your credit card to withdraw cash, interest will be compulsorily charged until the full payment is made.

Meenal is a credit card user and she is handling a credit card for the first time. She makes a purchase of Rs. 10,000 from her credit card. By the end of the billing cycle, she pays the balance amount within the due date clearing all her balance. Therefore, she will not be charged interest on her purchases in the next month or the next billing cycle. This is how the grace period works and how to use it wisely.

On the other hand, Gautam is also a credit card user who has been handling a credit card for the first time. He also makes a purchase of Rs. 10,000 from his credit card but fails to pay Rs. 2,000 before or by the due date. Then, the unpaid amount would start accruing interest charges from the beginning of the billing cycle. Hence, the purchases made in the second billing cycle would also be hit by interest charges that Gautam is bound to pay.

Although the interest charges may not be huge, if this continues to happen every month or billing cycle then it will cost Gautam a huge amount of money that he could have saved if paid the balance on time.

Many credit card holders are unaware of the credit card grace period and end up losing a noticeable amount of money annually. Remember that if you pay full in some months and then do not pay in full in the others, then you might lose the leverage of the grace period on your credit card for the month in which you don't pay in full. So, to keep your grace period in check and make complete use of it, positively pay your bill amount in full every month and by the due date.