The time window you get to repay your outstanding balance without incurring any interest charges is known as the grace period.
It's a free period to use your credit, however, not all credit cards offer a grace period. To reap the benefits of the grace period, you must repay your full balance by the due date. Let's dig deeper to understand the credit card payment grace period.
The credit card grace period depends solely on your credit card issuer and their rules and regulations, but it is generally about a month long. Here are the things you need to know to understand the grace period of your credit card -
Billing Cycle: This is the period over which the credit card company tracks your spending. This is generally a month long.
Statement Generation: At the end of the billing cycle, credit card companies send you a statement detailing all your purchases and the total amount due.
Grace Period: The time between the end of the billing cycle and the due date for payment is known as the grace period. This is an interest free window. You can make purchases and won't be charged any interest as long as you pay the full outstanding balance by the due date.
By paying your entire credit card balance by the due date each month, you can utilize the grace period. This way you can avoid accruing any interest charges on your purchases. Thus, you enjoy the convenience of credit without the added interest costs.
Now that you know what is the grace period of repayment in credit cards, let’s learn some tips that can help you to utilize it better. These will help you save money on interest charges and maintain a healthy credit score -
Pay your entire balance by the due date.
Choose a credit card with a long grace period and features that align with your spending habits.
Set up automatic payments for the full statement balance to avoid late fees.
Understand the specific terms and conditions of your credit card agreement, such as the grace period duration, interest rates, and fees.
Monitor your credit card spending to stay within your budget.
Make larger purchases towards the beginning of your billing cycle to maximize the available grace period.
Avoid cash advances as they do not come with a grace period; you incur interest right from the day you withdraw funds.
Maintain a credit utilization ratio under 30% to keep your credit score on track.
Not paying the entire bill by the due date will make you lose the benefits of the grace period. Suppose your entire bill is Rs.10,000, and you pay only Rs.3,000. You will then incur interest on the remaining Rs.7,000.
By the next due date, you have to pay the Rs.7,000 and any other amount that you billed to your credit card in that month. Once you pay the whole amount, you get the grace period benefits back.
For the grace period to work, you need to pay the entire amount by the due date. If you just pay the minimum due amount, you will incur interest on the remaining amount starting from the due date.
To avoid paying interest in the future, you can pay as much as you can from the outstanding amount. Once you have cleared the entire outstanding bill, your grace period will work as usual.
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The grace period is a feature of credit cards that lets you borrow money or bill purchases to your credit card interest-free for a specific period. By understanding how it works and following the tips mentioned in this article, you can utilize the grace period to your advantage.
Remember to pay your full balance by the due date to avoid accruing interest charges and maintain a healthy credit score.
How long is the grace period on credit cards?
Does missing credit card payment by 1 or 2 days affect credit score?
What happens if I only pay the minimum amount due on my credit card?
Does the grace period apply to cash advances?
Can I still earn rewards if I don't pay my credit card balance in full every month?
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