When Your Credit Card May Not Have a Grace Period

With credit cards, you have a certain amount of time that you can pay your balance in full and avoid paying interest on your credit card balance. That time period is known as the grace period.

The Credit CARD Act of 2009 requires grace periods, on credit cards that have them, to be at least 21 days long which gives you have enough time to pay your balance in full and avoid interest. Grace periods vary among credit cards, but they’re typically between 21 and 25 days. Longer grace periods are better because you get a few more days to pay off your balance and avoid a finance charge. There are some situations when the grace period may not apply.

Some Credit Cards Lack a Grace Period

While it’s pretty rare, there are credit cards that don’t have a grace period at all, not for purchases, balance transfers, or cash advances. Most savvy consumers wouldn’t sign up for a card like this, but stranger things have happened.

To find out if you have a grace period and confirm the length of the period, read through your credit card agreement or billing statement. If you don’t have one, you can find a copy of your credit card agreement on your credit card issuer’s website or at FederalReserve.gov/CreditCardAgreements.

Cash Advances Don’t Get a Grace Period

Credit card issuers don’t give a grace period on cash advances – that is, a cash withdrawal from an ATM. Instead, interest starts accruing on the cash advance balance from the day you make the withdrawal. By the time the billing statement comes, you’ll have accrued a full billing cycle of interest that won’t be waived even if you pay the cash advance in full. Repay your cash advance as soon as you can (you don’t have to wait for the bill to come) to minimize the amount of interest you pay.

No Grace Period When You Already Have a Balance

Most credit cards only give a grace period when you begin the billing cycle with a $0 balance. However, if you already have a balance when the billing cycle begins, then you’ll likely be assessed interest on new purchases as well as the old ones. Look at the back of your billing statement for the section on how your interest is calculated. If it says something like “Average daily balance (including new purchases)” then your new purchases don’t get a grace period unless you paid your balance in full last month.

Loans With Grace Periods

When it comes to loans, the term ‘grace period’ has a different meaning. If your loan has a grace period, that means you have a few extra days after the payment due date to send your payment and avoid late penalties. Check your billing statement or call your lender to see if you have a payment grace period with your loan.

Student loans typically have a six- to nine-month grace period starting after you graduate or drop below half-time. During that grace period, you’re not required to make loan payments. Your lender can give you information about your student loan grace period.

Sources: Federal Trade Commission, U.S. Department of Education