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207. Why is a grace period important?




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This article is from the Credit cards and Consumer Credit FAQ, by adams@spss.com (Steve Adams) with numerous contributions by others.

207. Why is a grace period important?

The grace period is the time after the billing date that you have to
pay off the bill without paying finance charge. (Grace periods for
cash advances are pretty rare, since the bank would lose money on
them.) T&E cards typically have generous grace periods; bank cards
usually have 25 days but a few have 30 and many have no grace
period. In every case the grace period runs from the date printed
on the bill, not from the date you get the bill.

For instance, suppose your bill is prepared on the 28th of every
month and the grace period is 25 days. If you make a purchase on
July 3 it will show up on the July 28 bill and you'll have until
August 22 (July 28 plus 25 days) to pay it off for free. If you
don't pay the full balance, your August bill will show a finance
charge, and so will every bill after that until you pay off your
full balance.

Some banks give you a grace period only in months when your previous
balance is zero. Others (fewer of them all the time) give the
stated grace period on all new purchases even if you have a balance
from last month. The second method can save you big bucks; be sure
to find out how your bank does it when you apply for the card.

 

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