What is a credit card grace period? It can help with your next big purchase
Mastering your credit card’s often-overlooked features could save you hundreds
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If used responsibly, your credit cards are a valuable tool to build credit and earn rewards. But most cards have a lesser-known benefit that is a big help for large purchases.
The trick is taking control of your billing cycle. Most cards have what’s called a grace period. It’s not like the extra days some mortgage lenders offer to get your monthly payment in. It’s simply the amount of time your card issuer gives you to pay your balance after the company tallies your purchases each month.
If you understand this cycle, then you’ll have an advantage when you’re shopping for big-ticket items (a widescreen TV, new car tires) or making a large payment with your card (your child’s tuition, a car down payment).
And if you don’t master your card’s grace period, your new but super-necessary refrigerator can easily cost you punishing interest charges .
Depending on the length of your grace period, you’ll have nearly the full billing cycle of about a month, plus the grace period of several weeks or more. That could give you close to two full months to pay off your balance without any interest, allowing a bit more financial flexibility when planning your budget.
During that window, you might have an additional payday or two before your bill is due, giving you time to build up cash to pay off that purchase. That extra time can come in handy if you face a surprise car repair bill when you need to pay for that new TV.
Remember: Any balance left over after your grace period will build interest.
The grace period perk is especially helpful when you have a new credit card and you’re trying to meet the requirements for a welcome offer . You maximize the value of your credit card bonus or rewards program when you aren’t offsetting it by paying interest.