What does a grace period really mean?

Payment due marked on calendar

Thanks to the Credit CARD Act of 2009, credit cards’ grace periods, the time during which you are allowed to pay your credit card bill without having to pay interest, are a little easier to understand.

That’s because the act says card issuers who offer grace periods must offer them for at least 21 days from the date of your statement. However, it doesn’t say that cards must offer grace periods.

Grace periods typically only apply to new purchases. Credit card issuers won’t let you slide on the interest they charge for cash advances and balance transfers. In fact, in many instances, interest on those things is higher than what’s charged for new purchases.

Grace periods vary by issuer, but are generally around 20 to 25 days. And during your grace period, your card issuer will virtually loan you money for free from the day you make a new purchase to the last day of your grace period.

So if you make your payment on time (your due date will always fall within the grace period), you’re in the clear.

Grace periods vary by issuer, but here’s a snapshot of a few common ones:

The American Express Blue card, like most of the cards in the Amex family, does not accrue interest on new purchases made for at least 25 days after the close of each billing period, as long you pay the entire balance by the due date each month.

The Citibank Citi Platinum Select card has a 23-day grace period. If the balance isn’t paid in full during that time, interest charges accrue from the date of the purchase.

MasterCard BusinessCard card also has a 25-day grace period.

However, just because you have a grace period, you might think twice about using it.

If you’re one day late, or don’t pay the entire balance, you’ll be charged interest. And some card issuers like American Express and Citibank will charge all the interest from the date of the purchase.

Others will begin the interest clock from the date of your statement.

And don’t think the old "lost in the mail" excuse will save you. Just because your statement is late, or is buried in a mailbag in someone’s basement, you still have to make your payment in full, and on time, to stay within your card’s grace period.

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