Credit cards offer grace periods that let you pay off your balance before interest has the opportunity to accrue. However, that same grace period can go away if you leave a balance on your credit card for too long, even if you make the minimum payment.
Without a grace period, interest accumulates when you make a new purchase. Here’s what to know about how you can lose your grace period and how to get it back.
How a credit card grace period works
A credit card grace period is the time between the end of the billing cycle and the payment due date. It’s typical for credit card issuers to offer a grace period for purchases, but they’re not required to. A credit card company must deliver bills to you at least 21 days before the payment is due, according to the Consumer Financial Protection Bureau.
Some purchases accumulate interest right away, even if you had no balance beforehand. Cash advances and convenience checks typically accrue interest on the transaction date and compound daily. The rules can also vary for balance transfers and promotional offers, so it is a good idea to check your card’s agreement for those scenarios.
What happens when you carry a balance
You can lose the grace period regardless of how small your balance is. For instance, a cardholder with a $1,000 statement who pays off $900 by the due date is still left with $100 that carries over to the next statement.
That $100 balance starts to accrue interest daily, and any purchases can start to accrue balances as well instead of remaining interest-free until the next due date. Making more than the minimum payment may not be enough to restore the grace period. The best way to do that is by paying the balance in full.
Card agreements regarding grace periods vary for each issuer. If you pay off the balance in full after losing the grace period, it’s important to monitor trailing interest. Although interest is added to your balance each day, it typically shows up on the next billing statement.
How to restore the grace period and limit interest
The rules for restoring the grace period and limiting interest accumulation vary for each card issuer. Typically, you have to pay your balance in full and then pay in full for more than one billing cycle.
If you cannot pay a balance in full, it’s important to consider your options rather than letting the debt spiral. One option is to use a 0% balance transfer. While transfer fees can range from 2% to 5% of the card’s balance, you can end up with 0% annual percentage rate (APR) for 12 to 24 months, depending on the promotion.
If you want to keep your current card, enabling autopay may be the best option to get rid of new purchases quickly so interest doesn’t accumulate. You will have to keep enough money in the linked bank account to avoid overdrafts and interest. You can also consult your statement’s “interest charge calculation” section and contact your issuer to confirm the exact payoff amount and rules.
