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Using credit cards is much more than handing over the plastic and paying: there are ways to take advantage of each transaction to grow your credit history and, at the same time, buy everything you want without having to assume a high interest rate.
Remember that credit card issuing banks report payments to the credit bureau and, in addition, give their customers the possibility of escaping interest with the grace period.
Wondering what is the grace period for credit cards in the USA? Do not worry! We are here to answer you. With us, you will learn what the grace period is , how long it is and how to use it to your advantage.
What is a grace period?
The grace period, in English, “Grace Periods” is the period of time that elapses from the date of issuance of the statement of account until the expiration of the credit card bill. Technically, customers who pay the entire outstanding credit card balance within this period will be able to free themselves from interest.
Although banks, credit unions and other financial entities are not required to work with grace periods ; many of them do, either from the issuance of the card or with the passage of time.
How do grace periods work?
In order to understand how grace periods work , we must take a step back. So that? Basically, to make three key terms clear:
- Credit card closing date . Also known as the end of the billing cycle or cut-off date . As its name implies, it is the day of the month in which the financial institution closes the list of operations for a given billing cycle . Any expenses you make after the closing date of a credit card will be pending for the next billing cycle.
- Credit card expiration date . We are talking about the deadline you have to pay the monthly bill for your card. There are users who, for practical terms, are encouraged to change the expiration date of the credit card to synchronize the payment of the plastic with the cancellation of other accounts or to make sure they have enough money so as not to be late in their payments.
- Credit card outstanding balance . That is, the total amount that you owe to banks or credit unions at the time of the closing date of the billing cycle.
So how do grace periods work? Grace periods are activated with the credit card closing date and last between 21 and 25 days. During this time (just before the due date of the invoice arrives) the user will be able to pay the total outstanding balance so that the financial institution does not apply interest .
Tip: We recommend that you pay your credit card bill in full every month and without delays in order to keep the grace period active. Otherwise, you could lose it during the current month and the following month.
Is interest paid in the grace period?
It depends on a number of factors , including the type of transaction included in the billing cycle, the balance that was outstanding before the start of the last cycle, and the date of the last bill payment.
If you pay the full balance shown on the statement within the grace period, you will save big because you would be getting rid of the interest, at least that is subject to most transactions. And is that, issuers do not grant grace periods on certain types of operations, such as cash advances , ATM withdrawals and balance transfers , that is, paying one credit card with another .
If you make a partial payment within the grace period, then a portion of that total due will be interest free , but beware! The remaining figure will not be . The same will happen if you have an outstanding balance, but in reverse: the interest rate will be applied to that remaining amount, while the remaining amount will not (as long as you pay it within the grace period).
Grace period: practical example
To understand how credit cards work in the United States and the grace periods, we are going to give a practical example :
Imagine that you have a credit card from Chase or from any other bank of your choice. On August 2, you use this card to buy a laptop ($ 500) . The billing cycle of your card closes on the 15th of the month and just that day you receive your account statement. When checking the payment date, you note that it will be September 9, that is, 25 days after the billing closes.
- If there were no outstanding balances, that is, your card was at $ 0 as of August 2 (computer purchase date), then you will have 25 days to pay the $ 500 without interest . As long as you make the payment before September 9, you can get rid of the APR.
- If you had an outstanding balance of about $ 100, the bank will have already applied the interest rate. When? On the expiration date of the previous grace period . So, technically, you will be able to pay the $ 500 interest-free before September 9, but a small amount of your total debt ($ 100) will have been transformed with the interest rate. Therefore, your total debt would not be $ 500, but $ 500 + ($ 100 + APR).
- If, in addition to buying a $ 500 laptop, you requested a cash advance before the closing date of the billing cycle, the same will happen as in the previous case . The bank will apply the APR for cash withdrawals as of the closing date of the card, including in the statement of account the $ 500 free of interest from the computer plus the $ 100 that you have withdrawn and their respective interests.
- If you cannot pay within the grace period, that is, it arrives on September 9 and you do not pay the bank the entire amount owed , those $ 500 (assuming it is the only thing you owe) will be increased by the application of the rate of interest.
- If, before September 9, you pay $ 250 of the debt and leave the remaining $ 250, then the bank will only apply the interest rate to the outstanding balance ($ 250) . It's not ideal, but it's better than nothing.
In these last two cases, the amount owed will carry over to the next billing cycle .
Remember: When you do not pay the outstanding balance before the end of the grace period, the bank applies interest. These interest charges will begin to be computed from the day of the purchase or operation. That is why it is important to check your credit card balance frequently.
What is the grace period for credit cards in the USA?
So far, you already know that grace periods vary between 21 days and 25 days. The main credit card issuers in the United States work with an average of 24 days . We leave you the most popular banks in the United States with their grace periods so that you can examine them at a glance:
| What is the grace period for credit cards in the USA? | |
| Credit card issuing bank | Grace period length |
| Chase | 21 days |
| Citibank | 23 days |
| Capital One | 25 days |
| Wells Fargo | 25 days |
| Bank of America | 25 days |
| American Express | 25 days |
| Discover | 25 days in most cases *** If the billing cycle begins in February, the bank will only give a 23-day grace period. |
Remember: Under the Credit CARD Act of 2009, banks are required to send you, either physically or electronically, your credit card bill at least 21 days in advance of the payment date. Precisely, this is the law that marks the birth of grace periods in the United States.
Does paying within the grace period affect credit?
No. You can make payments during your grace period without having to fear a reduction in your FICO score , for example. The only way that a payment can affect your credit score or credit score is if you perform after the expiration date. If you don't pay even the minimum amount on your credit card for 30 days or more, the issuer will send a report to the main credit bureaus in the country, which could lower your score.
Why is the credit score affected in this case? Because financial institutions have the right to inform the credit bureaus of the late payments of their clients . Anyone who is in default, in addition to receiving additional charges, will have a delinquency note on their payment history.
What happens if I don't pay the full balance during the grace period?
As we said, if you do not pay the full amount of the invoice during the grace period, you will have to face the much dreaded Annual Percentage Rate (APR) . This interest rate will be applied to any unpaid balance on the card.
However, not paying the full amount due during the grace period has another consequence: You won't be able to avoid calculating interest in the next billing cycle .
How to activate the grace period of my credit card?
This will depend on the issuing bank. Each credit card agreement is unique and contains details about the length and operation of your grace period. We recommend that you carefully read your bank's contract to determine how many days of grace period you will have and how you can avoid interest.
Anyway, we leave you a summary with the usual practices of the most popular banks in the United States :
| How to activate the grace period of my credit card? | |
| Credit card issuing bank | To activate the grace period, you will have to ... |
| Chase | Pay the balance due on the credit card in full for one cycle. |
| Discover | Pay the balance due on the credit card in full for one cycle. |
| Citibank | Pay the balance due on the credit card in full for two consecutive cycles. |
| Capital One | Pay the balance due on the credit card in full for one cycle. |
| Wells Fargo | Pay the balance due on the credit card in full for one cycle. |
| American Express | Pay the balance due on the credit card in full for two consecutive cycles. |
| Bank of America | Pay the balance due on the credit card in full for two consecutive cycles. |
| Other banks in USA | Pay off your credit card balance in full for 1-3 consecutive cycles. |
How to extend the grace period of a credit card?
The only way to extend the grace period on a credit card is through holidays. Grace period extensions occur when a credit card bill is due on a bank holiday or non-business weekend.
In this case, you can make the payment the business day after the due date without having to worry about interest , so we could say that being aware of holidays in the United States could help you extend the grace period of your credit card.
How to reactivate the grace period of my credit card?
Most credit card issuers reactivate the grace period once the customer pays the entire debt before the due date . Typically, you will need to do this for 2-3 consecutive billing cycles.
reference: https://www.creditosenusa.com/cual-es-el-periodo-de-gracia-de-las-tarjetas-de-credito-en-usa/