What is a grace period on a credit card? How it works and how to keep it

What the grace period is

The CFPB's credit card glossary defines it as the period between the end of a billing cycle and the date your payment is due. The CFPB's credit card contract definitions say a grace period exists for a specific balance when you do not have to pay interest on that balance.

It is a condition, not a gift. You get the interest-free time by paying what you owe in full, on time.

How it can be lost

If you pay only part of the balance, the interest-free time usually goes away. The CFPB's glossary says you may not be charged interest if you pay the full balance by the due date. Your card agreement says exactly how the card treats a partial payment, and which balances get a grace period at all.

A mix-up to avoid is confusing the grace period with a late-payment window. The CFPB says card companies generally cannot treat a payment as late if it is received by 5 p.m. on the due date, in the time zone on your statement. That is about being late. The grace period is about interest.

Convenience checks are a case where it can be missing. The FDIC says interest on a convenience check often starts when it clears, even if your regular purchases have a grace period.

For a couple

When two people use one card, one person should own the payment date. Put it on a shared calendar, since a missed payment costs both of you.

Paying in full, and paying part

• Statement closes September 25 with a balance of $640; the payment is due October 20
• Pay $640 by October 20: no interest on those purchases, as long as your agreement gives a grace period
• Pay only $500: $640 - $500 = $140 carries over, and the grace period on new purchases may end under your card agreement
• Check your agreement for how a card gets the grace period back