How to Make the Most of Your Credit Card Grace Period

One of the potential benefits of using a credit card instead of a debit card (or cash) is that you don’t have to pay for your purchases right away. Thanks to your credit card’s grace period – which extends from the end of the billing cycle to the due date on your credit card statement – you can get anywhere from a few weeks to up to two months before paying the fee.

“A credit card grace period extends the amount of time you have to pay your card bill without paying interest,” said Jared Beilby, credit analyst at Merchant Maverick. “This means the grace period is great for making large purchases that would otherwise be inconvenient to buy immediately with cash. You can instead defer payment for the purchase for until the grace period ends.”

If you think carefully about your budget, a grace period can help you maximize your cash flow – it just requires a bit of strategic planning.

“If you make a big-ticket purchase at the beginning of each statement cycle, you’re essentially getting an interest-free loan for almost two months,” says Beilby. “This is because your statement’s billing cycle typically lasts about a month, and then the grace period lasts 21 to 25 days after that. Because you made a purchase at the beginning of the cycle. period, you won’t need to pay off your purchase in full until the end of the grace period, which is seven to eight weeks later.”

Here are some steps you can take to ensure that you use that time wisely:

Some credit card issuers will let you choose a statement due date, which can be useful when you’re budgeting for a large purchase or simply trying to maximize cash flow. mine. While you can’t change it from month to month, read your card issuer’s terms to see how often you can update your card.

“You can use this to your advantage by setting the date it works for your cash inflows – for example, after your regular paycheck is deposited into your bank account,” says Beilby. your.

In addition to determining when to turn your credit card bills onto your payslip, choosing a due date can allow you to have all your bills due on the same day to keep your finances in check. lid or lets you organize your bills to give yourself more flexibility.

The golden rule of credit cards is to pay your balance in full each month.

“If you’re among the roughly half of credit cardholders who pay their bills in full and avoid interest, the grace period could be a long time,” said Ted Rossman, senior industry analyst at Bankrate. a great advantage”.

For example, Rossman says he has a credit card that generates monthly statements on the 19th of each month with a due date on the 16th of the following month.

“Let’s say I made a big purchase on August 19, right after I received my statement. It won’t show up on my bill until September 19, and it will arrive. due on October 16. It’s basically two interest-free months without the need to raise through any special round,” he explained.

To enjoy the interest-free grace period, you need to pay the card in installments each month.

“If you carry the balance from one statement period to another, the grace period disappears and interest accrues every day — until you pay it off in full and get the grace period back,” Rossman explains. next month,” Rossman explained.

Be sure to read your cardholder agreement to confirm the details of any grace period, specifically the language about avoiding interest payments.

Tia Elbaum, spokeswoman, public affairs office, Consumer Financial Protection Bureau, said: “Terms can vary from card to card, but renewal periods generally only apply to new purchases if the consumer does not have a balance.

That’s one of the many reasons why it’s important to keep an eye on your growing balance so you can pay off your balance in full by the due date and avoid interest, says Beilby. If you do not pay your balance in full, you will be charged interest on your outstanding balance and interest charges will also accrue monthly until your balance is paid in full. In addition, if you continue to make purchases, they will also be included in your revolving balance.

Typically, the grace period will only apply to new purchases. According to the Consumer Financial Protection Bureau, if you use your credit card to advance cash or use a check you receive from a credit card company, you may begin paying interest immediately. from the date of advance or use of check.

If you’re looking for more time to pay off your credit card balance, you might consider signing up for a new credit card with a 0% interest promotion. With these cards, you may not be charged interest for as long as 20 billing cycles as with Bank of America Visa® Platinum Card, says Rossman. After that, the variable APR is 15.99% – 25.99%. Balance must be transferred within 60 days of account opening.

“You usually need to make minimum monthly payments on these accounts — usually 1% or 2% of the balance,” explains Rossman. “And try if it’s possible to pay off the entire balance before interest starts accruing at the end of the term. When the 0% meter runs out, you could face huge interest rates of 15%, 20% or more. even more in some cases.”

Rossman says he’s a big fan of the 0% interest promotions on new purchases as well as balance transfers. “I’m just careful that the bills are due at some point,” he said.

It’s important not to see these deals as reasons to overspend. “If you’re disciplined about them — perhaps by dividing the amount you owe by the number of months in the 0% term and then sticking with that — they can smooth your cash flow and help you out. save a lot of money,” adds Rossman.

If you recently opened a credit card to take advantage of a welcome bonus (like the Chase Sapphire Preferred® Card’s 60,000 points welcome bonus after spending $4,000 on purchases in the first three months of open an account), you can focus on hitting a big spending threshold.

“Because a credit card welcome bonus typically requires the new cardholder to spend a certain amount that typically ranges from a few hundred to a few thousand dollars in the first three months or so, you can use the extend time to your advantage to maximize spending you want Rossman to say.

So if you’re looking for expensive furniture or new kitchen equipment, you can extend the time it takes to pay those fees while maximizing the number of rewards you can earn.

But Rossman cautions that you shouldn’t overspend just to earn a bonus, as the interest expense can outweigh the value of the reward. Before applying for a bonus, make sure that the spending fits your budget and that you feel confident that you will have enough cash to pay off your balance in full before the grace period ends. .