Why pay interest fees if you don’t have to? That’s what credit card grace periods are for. This period allow you to avoid paying interest on your credit card, but there’s just one catch: Grace periods are not immediately understood by most consumers. You have to know your billing cycle, as well as what’s required of you to maintain your grace period eligibility every month. Here’s how a grace period can help your finances.
Grace period definition
What is a grace period, exactly? A credit card grace period refers to the time between the end of your billing cycle (also referred to as your closing date or statement date) and when your payment is actually due. It is during this grace period that you have an opportunity to avoid paying interest charges on new purchases.
Not all credit card issuers offer a grace period, but most do. If your credit card issuer does offer a grace period, it must be at least 21 days long. This minimum applies thanks to the Credit CARD Act of 2009, which requires credit card issuers to give consumers 21 days between the day a statement is issued and the day the payment is due.
How to qualify for the grace period
Now that you know the grace period definition, how do you use it? Just because your credit card issuer offers a grace period does not mean you automatically reap the benefits of interest-free transactions across the board. The only way you won’t be charged interest on your credit card is if all of the following are true:
1. You pay the full balance by the due date.
Minimum payments won’t cut it, nor will any amount less than your full balance. To take advantage of your credit card’s interest-free grace period, you must pay your balance in full by the due date.
2. You don’t carry a balance from the month before.
If you do not return your balance to zero for one month, then you will likely forfeit your grace period privilege the next month. This applies to even the smallest of balances carried forward. For instance, if you carry just $5 into the new billing cycle, you’ll not only be charged interest on that, but also any new charges you make to the credit card.
Let’s say you pay this month’s balance in full. If you didn’t do that last month too, then the interest-free grace period does not apply this month either. That’s not to say you shouldn’t pay this month’s balance in full anyway; in fact, it’s the only way to get your grace period back. Just keep in mind that some credit cards issuers require two consecutive months of full payment before the grace period is reinstated.
3. You only have new purchases charged to the card, not cash advances, checks, or balance transfers.
Double-check with your credit card issuer, but most apply the grace period only to new purchases. Cash advances, checks, and balance transfers will likely start accruing interest on the date of the transaction. If any of those apply, you will see interest charged to your account. This doesn’t mean you’re using your credit card wrong; sometimes cash advances may be necessary and balance transfers can be smart. It’s just something you need to be aware of and prepared for.
One exception to this rule is balance transfers with 0% introductory rates. To understand how that works, take a look at this example from Chase:
You transfer a balance or write a check for $600 at a 0% APR for 12 months. Then you make $300 in new purchases which brings your total balance to $900. In this example:
- You would be charged interest on your new purchases ($300) if you do not pay the entire balance of $900 by the due date and time.
- You would not be charged interest on your $600 0% APR Balance Transfer for the 12-month offer period.
What is the grace period on a credit card I own?
To learn about the grace periods for your specific cards, look at your credit card agreements for your issuers’ rules. If you don’t have a copy of the credit card agreement you signed, you should be able to find it on your issuer’s website. You may also be able to find it on the Consumer Financial Protection Bureau website, where they keep a database of credit card agreements of more than 300 issuers.
The credit card agreement should also list the interest charges specific to different categories of transactions. You may pay a different rate on balance transfers, for example, than you do on cash advances.
Credit card issuers are also required by law to keep your due date the same every month, allow payments up until 5 p.m. on the due date, and extend the due date to the next business day if it falls on a weekend or holiday.
More than interest fees at stake
If you’re in the habit of carrying a balance on your credit cards, making use of the grace period may prove challenging. Maybe the money you save on interest charges won’t seem worth the struggle and discipline required to pay off your balance every month, but the ultimate goal isn’t avoiding interest; it’s avoiding debt. The only way of doing that is the same way you avoid interest fees—returning your credit card balances to zero every month.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.97% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.57% – 6.97%1||Undergrad & Graduate|
|2.51% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.50% – 7.24%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|