How to Use Your Grace Period to Avoid Paying Credit Card Interest

A woman smiles as she checks her credit card statement on her phone.
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While credit cards can be an ultra convenient financial tool, the high interest rates they come with could mean that you’re paying more than you bargained for. Luckily, you have some breathing room since credit cards come with a grace period. Plus, if you make a payment well within this time, you may not have to worry about interest charges at all.

What Is a Credit Card Grace Period?

A credit card grace period is the time between when the billing period ends and when payment is due. During this time, you may not be charged interest if you pay off the balance of the bill by the due date. Essentially, the statement date (at the end of the billing period) is when credit card companies send a credit card statement and the time when your grace period starts. The grace period ends on your payment due date.

Here’s a closer look at the two dates involved in a credit card grace period:

  • Statement date: This date is when your credit card issuer calculates the total amount of all your transactions within the billing period, such as purchases, refunds, payments, and cash advances. It then uses this information to create your credit card statement or bill, and will show the amount you’ll owe before the payment due date.
  • Payment due date: This is when the credit card issuer will have to have received your payment. By law the payment due date needs to fall on the same day each month. Unlike other types of loans, the payment due date is when the payment (at least the minimum stated on your credit card statement) needs to be paid on your credit card.

Under federal law, credit card issuers don’t have to give you a grace period but if there is one, it needs to be 21 days. Depending on your credit card issuer, you’ll receive a grace period anywhere from 21 to 25 days.

If you’re unsure of how long your grace period is, look at your credit card agreement — it should be around where you see the annual percentage rate (APR) and fees are listed. Or, you can call your credit card issuer and ask.

Keep in mind that grace periods are only for purchases. Other transactions such as using checks your credit card issuer provides or taking out a cash advance don’t count. In these instances, you’ll accrue interest right away, and these changes may be different than your rate for purchases.

What Happens If You Carry a Balance After Your Grace Period?

If you have a balance after your grace period, you will be charged interest on the amount you carry. For instance, if you make the minimum payment before the due date and still have a remaining balance of $200.50, then you’ll be charged the purchase APR.

What’s more, you’ll usually lose your credit card grace period for the next billing cycle. That means you’ll be paying interest for the remaining balance from the last cycle as well as interest for new purchases.

However, you can restore your grace period if you make on-time payments and pay the full balance off. How long it’ll take will depend on your credit card issuer — it may take a few months of consistent on-time payments of your full balance amount.

How to Maximize Your Credit Card Grace Period

When used responsibly, a credit card can be a great tool, especially if you can maximize your credit card grace period.

Here are some suggestions on how to do so:

  • Pay your credit card balance in full: If you’re able to, paying off your balance in full each month before the payment due date for purchases ensures you’re not paying any interest.
  • Enroll in autopay: Going this route is helpful so that you’ll pay at least the minimum amount (or ideally, the full balance) by the due date, instead of trying to remember to do so manually if you’re looking to avoid paying interest.
  • Time your credit card purchases: To ensure you can pay off your credit card balance in full, it’s a good idea to budget and time your purchases to ensure you can afford to pay off what you owe by the time your statement is sent to you.

Can You Extend Your Grace Period?

Not officially, but you may be able to lengthen the amount of time you’ll have to pay for a purchase if you can understand your credit card issuer’s grace period and time the credit card purchase correctly.

That being said, this is only usually effective for planned credit card purchases — unexpected expenses like fixing a broken heater is hard to predict. But for purchases that can wait or you have a plan already in place, you can time it in such a way that you’ll have more than the usual grace period to pay it off without incurring any interest.

How you do it is to make a purchase right after the billing cycle ends. That way, it won’t show up on your next credit card statement. Rather, you’ll have close to a month (or however long your billing cycle is) until the transaction shows up on your credit card statement, plus 21 to 25 days before you’ll need to owe payment.

For example, let’s say you want to buy a new laptop and want some extra time to save some more cash to avoid paying interest on your credit card. Your billing cycle ends on Aug. 25 and your payment due date is Sept. 17.

You purchase your laptop in August, therefore pushing that transaction for your next billing cycle. You’ll have until Oct. 17 to pay off the credit card balance in full.

Contributor Sarah Li-Cain is a personal finance writer based in Jacksonville, Florida, specializing in real estate, insurance, banking, loans and credit. She is the host of the Buzzsprout and Beyond the Dollar podcasts.