Grace Period
The time between a billing cycle's end and the due date during which no interest accrues on new purchases.
What is Grace Period?
A grace period on a credit card is the span of time — typically 21 to 25 days — between the end of a billing cycle and the payment due date. If a cardholder pays the full statement balance by the due date, no interest is charged on new purchases made during the previous cycle. Grace periods only apply when there is no existing balance carried from month to month; once a balance is carried, interest accrues daily on new purchases immediately. Maintaining a zero balance each month preserves the grace period and effectively makes the credit card an interest-free loan for up to 55 days.
Example
A billing cycle closes on the 15th of the month. Payment is due on the 10th of the next month — a 25-day grace period. A cardholder who pays $1,200 in full by the 10th pays no interest. One who pays $1,100 loses the grace period on the remaining $100.