Grace Period

If you pay your bill in full each month, on time, you can avoid being charged interest. The time during which you can enjoy the use of the issuer’s money interest-free is known as the grace period.

Most credit card issuers describe this in a rather complicated way. They say that the grace period extends for a certain number of days after your credit card statement date. (The statement date is the date on which the bill was prepared by the card issuer, not the date on which you receive it. You may receive it as long as two weeks after the statement date.)

The grace period often is 25 days, but some companies have reduced it to 20 days. A short grace period can mean that, by the time you receive the bill, you’re already racking up interest charges. In this case, you may need to check your account by telephone or on-line and pay your estimate of the bill before the statement arrives each month.

If you plan to pay your bill in full each month, you want to be certain you get a card with a longer grace period, so you avoid interest charges.

Also, check the fine print for language that says the credit card provider can change the grace period at its discretion, since this can have a profound effect on how much interest you wind up paying.

And look for wording that refers to a double billing cycle. In this case, the due date to send in your minimum payment is different from the due date to pay off your outstanding balance, interest-free. In some cases, to avoid interest charges, you may have to pay your bill two weeks before the stated due date.

Next: Finance Charges