Credit card grace period explained: 5 key things every user must know

Smart credit card usage is more than spending control. It comes with several other important features and benefits. One such feature is the credit card payment grace period. This key feature helps avoid interest charges and assists credit card users in maintaining financial integrity.

Proper repayments within credit card grace periods also keep borrowers' credit scores intact. This is a way to build a solid credit history and boost one's overall credit profile. Missing the credit card grace period can result in late payment fees, card restrictions, a negative impact on credit scores, and loss of grace period privileges.

What is a credit card grace period?

As explained by Saurabh Puri, Chief Business Officer, Credit Cards and Lending Products, Zaggle, “A credit card grace period is the interest-free time between your billing cycle’s end and the payment due date. If you pay your full outstanding balance within this period, you won’t be charged any interest. Typically, banks allow 18-20 days after the statement date to clear dues, making timely payments crucial to avoid any extra charges.”

5 essential things users must understand

1. Interest-free advantage: It is crucial to note that the grace period will apply only if you repay the full amount on time. Partial payments will remove this benefit. The consequence will be that the banks will start charging interest immediately, which can result in serious debt buildup. That is why it should be avoided at all costs. Judicious and responsible use of your credit card is key.
2. Importance of consistency: If you miss out on even a single payment, then it will reflect poorly on your credit profile. It might even result in legal notices, late fees and higher interest rates according to the contractual obligations of your issued credit card. It can even decisively damage your credit score.
3. Cash withdrawals excluded: When you withdraw cash on credit cards through ATMs, then all such withdrawals do not enjoy a grace period. In such cases, both the cash advance fee and the interest are charged instantly. That is why withdrawing cash on credit cards should always be the last resort.
4. Billing cycle awareness: Every credit card has a unique billing cycle. Aligning large purchases with the beginning of your credit card bill cycle can maximise the repayment window and give you breathing space to plan repayments properly. Such planning can help you use your credit card efficiently.
5. Plan for emergencies: When using a credit card, always remember that you are borrowing from the future. If the repayment cycle gets broken or delayed, interest will build up. That is why you should always track your due dates. Set reminders or enable auto-pay to prevent missing any deadlines. Also, never borrow casually, i.e., never purchase products or services you don’t need, and plan for emergencies well in advance.

Hence, knowing the credit card grace period assists in avoiding interest and debt traps. Paying bills in full and keeping things simple is the best strategy for managing credit cards. Such a simple practice can help credit card users avoid extra charges, penalties, and surprises. It also helps in keeping credit scores healthy.

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