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What is a grace period?

CNBC Select explains what a credit card grace period is and answer some common questions about how it works.

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Many credit cards offer a grace period, which is the period of time between the end of a billing cycle and when your bill is due. During a grace period, you may not be charged interest on your balance — as long as you pay it off by the due date.

Grace periods vary by card issuer, but must be a minimum of 21 days from the end of a billing cycle. For example, if your billing cycle ends on the first of each month and your bill is due on the 22nd of the month, your grace period is 21 days.

Below, CNBC Select answers some common questions about credit card grace periods.

Do all credit cards have grace periods?

No, card issuers are not required to offer grace periods, though most do.

What transactions qualify for a grace period?

Grace periods typically don't apply to all transactions you make with your credit card. Eligible transactions are often limited to new purchases.

Cash advances and balance transfers typically don't qualify for a grace period. Instead, those transactions are charged interest beginning on the transaction date. However, if you have a balance transfer credit card offering an intro 0% APR, you won't be charged interest during the intro period.

What happens after the grace period?

If you continue to carry a balance after the grace period ends, you will be charged interest at the regular purchase APR (unless your card offers an intro 0% APR period). For example, if you have a credit card with a 16.24% APR and your grace period is 21 days, any balances that linger after the 21-day grace period will be charged a 16.24% APR.

You could be hit with a late fee on top of interest charges if you don't make at least the minimum payments before the grace period ends.

Where can I find my credit card grace period?

You can find your grace period in your cardholder agreement. It will likely appear in the "interest rates and interest charges" table on the first page and in a row stating "how to avoid paying interest on purchases" or "paying interest."

Here's an example of what it may look like in your cardholder agreement:

Interest rates and interest charges

Annual Percentage Rate (APR) for Purchases16.24% to 25.24%, based on your creditworthiness. These APRs will vary with the market based on the Prime Rate.
APR for Balance Transfers16.24% to 25.24%, based on your creditworthiness. These APRs will vary with the market based on the Prime Rate.
APR for Cash Advances 26.74%. This APR will vary with the market based on the Prime Rate.
How to Avoid Paying Interest on PurchasesYour due date will be a minimum of 21 days after the close of each billing cycle. We will not charge you interest on purchases if you pay your entire balance by the due date each month. We will begin charging interest on balance transfers and cash advances on the transaction date.

In the last row titled "how to avoid paying interest on purchases," you can see the grace period is a "minimum of 21 days."

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
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