A grace period is the interval between a statement closing and its payment becoming due,
during which purchases do not accrue interest if the balance is paid in full. It is the mechanism
that allows a credit card to be used at no cost, and it is also the feature most commonly lost
without anyone realising.
The condition is in full
The grace period applies only when the statement balance is cleared entirely. Paying most of
it does not preserve the benefit. On many accounts, once a balance is carried, interest begins
accruing on new purchases from the transaction date, and the grace period does not return until
the balance has been paid in full and, on some accounts, kept there for a full cycle.
This is why a single month of carrying a balance can cost more than expected. The charge is
not only interest on the amount carried; it is the loss of interest-free status on everything
bought afterwards.
What does not get a grace period at all
Cash advances typically accrue interest immediately, with no grace period under any
circumstances, and often at a higher rate plus a transaction fee. Several transactions that do
not look like cash advances are treated as such — certain transfers, some bill payments, buying
foreign currency. The terms list these, and it is worth reading that list once.
The practical consequence is a simple habit. Clear the statement balance in full each cycle
and the card costs nothing; carry a balance and the arithmetic changes more than the headline
rate suggests.
