What Is a Grace Period?

When credit card shopping make sure the card you get has a “grace” period. This is the amount of time between purchase and when the card company starts charging interest. It is generally 20-25 days and can save you quite a bit of money. This is most important when you pay your balance in full every month. In this case you do not pay interest on the money you borrow (this is sometimes referred to as “same as cash”).

Some merchants have a “same as cash” promotion on items in their store. This can be a very good thing if you use it wisely. It is similar to the “grace period” on your card. If you pay the amount in full within a stated period of time (anywhere from 30 days up depending on the promotion) you will not be charge interest, HOWEVER if you wait to pay this off until after the due date you will pay the entire amount of interest that has been accruing since the purchase. The best way to handle this is to make monthly payments that assure the amount paid in full on time.

Not all credit cards have a grace period. If your card has no grace period or if you keep a running balance you are charged interest from the date of purchase and cannot avoid interest payments.