Grace period
The time between the end of a credit card billing cycle and the due date during which paying in full avoids interest on new purchases.
What it means
On most credit cards, if you pay the full statement balance by the due date, you are not charged interest on purchases from that cycle. That window is the grace period. Federal law requires card statements to be mailed or delivered at least 21 days before the payment due date, and cards that offer a grace period must provide at least that long.
If you carry any balance past the due date, you typically lose the grace period, and new purchases start accruing interest right away until you pay in full again, sometimes for a full cycle or two. Cash advances and balance transfers usually have no grace period. The term can also refer to the time after a missed payment before late fees apply on some loans, or to the months before student loan repayment begins.
Example
For example, a billing cycle ends on March 31 with a $1,000 statement balance due April 25. Paying the full $1,000 by April 25 means no interest on those purchases. Paying only $600 means the remaining $400 starts accruing interest, and new purchases may too.
How it’s used
- Using a credit card without paying interest
- Timing payments around the statement and due dates
- Understanding interest after carrying a balance
Good to know
- Paying the statement balance, not just the current balance or minimum, is what keeps the grace period.
Related terms
Educational information only, not financial, tax or legal advice. Rules, limits and rates change; check the IRS, your lender or plan, or a qualified professional before acting.