A credit card is known to be one of the best sources to build your credit history and improve your credit scores. The only major requirement for credit cards to be useful and advantageous is the timely payment of dues and the credit utilization ratio.

It is important to understand all the terms and conditions before availing a credit card. This article addresses one of the most important conditions, which is the interest-free grace period.

What is an Interest-free Grace Period?

Let us understand the meaning of the above term

  • The grace period refers to the time span between your billing cycle date and the due date of payment.
  • The grace period is referred to as interest-free if you pay the bills timely and before the due date.
  • Any users who have unpaid balances would not be granted an interest-free grace period.
  • The grace period that is available to the customer may or may not be interest-free
  • If any cash advances are taken by the users then the grace period would not be allowed to these users.
  • If credit card holders fail to pay their bills on or before the due date, then the interest will be applied on the entire amount of the purchase including any purchase that has been done even after the due date.

Important Terms Related to Grace Period

To make payments easier and interest-free there are some terms and dates that need to be known by the user. Let us look at some of these

Statement Generation

The credit card bill that the user gets every month is called the statement. The date of statement generation is called the credit card bill date. This statement has details like the due date of payment, transaction history, reward points or cashback if any. This statement will more importantly have the due date of the credit card bill payment.

Grace Days

Grace days are days that are provided by the credit card issuer to the holder in addition to the days that are given as per the due date. These are additional days provided by the lender. The major advantage of this is that you can pay the credit card bill without interest even after the due date has passed. However, if the credit card holder fails to pay the bill even after the grace period, then the interest amount that is levied is very hefty.

Due Date

This is basically the last date of your billing cycle and the due date for payment of the credit card bill. The credit card holder can pay their bills up to this date without paying any interest.

How to Ensure an Interest-Free Grace Period?

Though the major trick to avoid any interest cost is the payment of the dues in time, here are some rules that you can follow to ensure an interest-free grace period.

  • Make a note of all the important dates related to payment of the credit card dues
  • Whenever possible, try to make the payment for the credit card in full. This way you can avoid any interest that is charged on part payments or late payments.
  • Always note that making part payments, the interest amount will always be charged on the remaining amount. Therefore, make a note of the grace period and the days. 
  • In the case of revolving interests and cash advances, the concept of an interest-free grace period does not exist.

Learning with Examples

Let us take an example to understand the concept better.

  • If we consider that the statement date is November 2nd and the date of payment of the credit card bill is November 22nd.
  • Now, since the payment date is 22nd November, the payment of the credit card bill amount is to be paid in full till this date. So, this is the interest-free period for the user.
  • For this example the payment date is 22nd and the date of statement is 2nd November. So the interest-free period is 20 days. The interest-free period generally ranges from 20-50 days.
  • Now for a transaction that is billed for Oct 3, the interest-free period is Oct 3rd to Nov 22nd.
  • Similarly, for a transaction that is billed for Nov 2, the interest-free period is Nov 2nd to Nov 22nd.
  • A lot of rewards and cashbacks are available on credit cards if the payment is made on the due date as specified.

No Grace Period

Kindly note that in some cases, the interest-free period does not apply. For some transactions like cash advances and revolving interest rates, there is no grace period. For these transactions, the interest is charged from the date of transactions.

These transactions should be kept in mind before they are entered into as they might be charged at a very high-interest rate otherwise and if defaulted.

Conclusion

While using credit cards, users might not think that the interest is very high. For a month or two, the interest does not seem to be much of an amount. But, if the interest keeps on accumulating, then the amount is substantial and the credit card holder might find it hard to pay off. In some cases, the credit card holders have gone deep into debt while not paying the credit card bills on time.

On an endnote, we can conclude that it is easy to stay away from paying interest on any bill amount. You can follow simple steps to plan your financial budget and make sure that all payments are made in time. 

FAQS of interest-Free Grace Period on your Credit Card

1:What is a grace period?

It is the time between the day when the billing cycle starts and the due date of payment.

2:Is interest chargeable if payment is made during the grace period?

No. Interest is not chargeable if payment is made within the grace period.