Grace Period
Interest-free period (21-25 days) between purchase and payment due date. Only applies if you pay statement balance in full each month.
What You Need to Know
Grace period is the interest-free time between your purchase and payment due date—typically 21-25 days. During this period, no interest accrues on new purchases if you pay your full statement balance.
How it works:
- Make purchase on January 5
- Statement closes January 31 (includes January 5 purchase)
- Payment due February 25 (21-day grace period)
- Pay full statement balance = $0 interest on January 5 purchase
Grace period only applies when:
- You pay previous statement in full (carrying balance = no grace period)
- New purchases only (cash advances have no grace period)
- Card offers grace period (most do, but check terms)
Lose the grace period by carrying a balance. Once you carry a balance, new purchases start accruing interest immediately—even during the "grace period." Rebuilding grace period requires paying full statement balance for 1-2 cycles.
This is how credit cards can be free: pay full balance monthly, enjoy 21-25 days interest-free float, earn rewards.
Sources & References
This information is sourced from authoritative government and academic institutions:
- consumerfinance.gov
https://www.consumerfinance.gov/ask-cfpb/what-is-a-grace-period-for-a-credit-card-en-55/
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