cardpileOne of your credit card’s most valuable features is also one of the least understood. Most credit cards offer an interest free grace period each month, but few card issuers do an effective job of explaining how this feature works.

The Basics of Your Credit Card’s Grace Period

As with any bill, the one you receive from your credit card account offers you a limited amount of time to make a payment after the statement is created and mailed. According to the CARD Act of 2009, credit card issuers must offer customers at least 21 days to make a payment, and many go beyond the law by offering as many as 25 days between the statement closing date and the payment due date. In addition, the vast majority of credit cards will waive interest charges if the entire statement balance is paid in full before the payment due date, and this time period is known as the card’s grace period.

Credit card users should understand that technically, interest is being incurred on their credit card’s average daily balance throughout the statement period and even during the grace period. However, credit cards that offer a grace period will waive these interest charges if and only if the entire statement balance is paid before the due date. When cardholders pay just one dollar less than the entire statement balance, they are then responsible for off of the interest charges incurred on their average daily balance. And likewise, if they pay the entire statement balance just a day late, they will also be responsible for interest charges and late fees, often at an even higher rate called the penalty interest rate.

Maximizing Your Credit Card’s Grace Period

About half of American credit card users always avoid interest charges by paying each month’s statement balance in full and on-time. When these credit card users understand how their card’s grace period works, then they can make some decisions that allow them to enjoy its maximum benefit. For example, credit card users can keep track of their credit card statement period’s end date, and postpone major purchases until after their statement period has closed. By making a major purchase during the following month’s statement period, cardholders receive an additional 30 days in which they can pay their credit card balances in full, and still avoid interest charges.

Regaining Your Grace Period

The other half of Americans will occasionally or regularly carry a balance on their credit cards. These credit card users will have forfeited their grace period and will be paying interest on their card’s average daily balance. However, they can regain their grace period and avoid future interest charges by paying their credit card’s entire balance in full by the next due date.

Other Strategies For Managing Your Credit Card’s Grace Period

Credit card users with multiple accounts can minimize their interest costs by keeping a grace period on some of their cards, even if they have to carry a balance on others. In this way, they are not paying interest on at least some of their charges, even though they are incurring interest on other charges that they are unable to pay in full.

Another way to accomplish this is to use Chase’s innovative Blueprint program, which allows cardholders to avoid interest on some charges by paying them in full while carrying a balance on other charges. Blueprint is available on select cards from Chase including Freedom, Freedom Unlimited, Slate and Sapphire Preferred. Blueprint also contains powerful budgeting and goal setting tools.

By understanding how your credit card’s grace period works, and how to make the most of it, you can avoid interest charges and realize even more value from your credit cards.

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