What is an Interest-Free Grace Period on Your Credit Card

Welcome to “Financial Behaviours: Can You Spot It?”!

Today, let’s analyse different credit card usage behaviours. Meet our subjects today, Mr. X and Ms. Y. Despite receiving their credit cards roughly around the same time, they have contrasting opinions about them. Mr. X believes credit cards put you in debt, but on the other hand, Ms. Y says they’re a lifesaver!

Let’s review their credit usage behaviour:

Mr. X is a tech-enthusiast, often purchasing the latest home improvement gadgets or audio devices and systems on a whim. However, he fuels his impulsive shopping sprees with his credit card. Regardless, he usually only makes partial payments barely before the due date. The remaining debt is carried forward to the next month, and it begins accruing interest from the beginning of the next billing cycle.

Ms. Y is a connoisseur of delectable cuisines. She frequently visits local cafes and restaurants to explore the ambience and delicacies. To cater to her taste buds, she uses a credit card with dining benefits and additional rewards. Furthermore, she pays her credit debt in full before the due date. Since she has no pending dues, the next billing cycle will remain interest-free.

The Results?

If you couldn’t spot the problem, here’s the answer – Mr. X practices poor credit usage habits by only partially paying back his outstanding dues.

Unlike him, Ms. Y responsibly pays all her dues promptly to avoid accruing any interest on the credit used. Due to this difference, they each have different opinions on credit cards and their benefits. You, too, could be like Ms. Y! Just read on and find out how.

Also Read: Things You Should Not Do With a Credit Card

What is an Interest-Free Grace Period?

Most credit card companies offer customers a grace period from when the statement is sent over until the billing date. During this period, you won’t incur any interest on purchases made using the credit card. Although, your grace period is only interest-free if you have been making timely repayment of dues.

Most credit card companies offer customers a grace period from when the statement is sent over until the billing date.

This option is only for credit card users like Ms. Y, who pay their dues on time. If you have pending bills from the previous billing cycle like Mr. X, you will incur interest on them and the purchases made after that.

3 Key Dates to Remember

While dealing with credit cards, it’s crucial to maintain healthy repayment habits. To stay within the boundaries of positive credit behaviour follow these dates related to grace periods.

1. Statement Generation Date: A credit card bill is sent over with records of all your transactions and details like billing due date, rewards, etc
2. Bill Due Date: Essentially the last date of your billing cycle post this period, your outstanding credit dues will begin to incur heavy interest
3. Grace Period: Offered by credit card providers to give you additional time to repay your outstanding credit, even after the due date has passed

Note: Once the grace period has passed without any payments, you will be liable to pay heavy interest.

A Quick Rundown: Points to Remember

An interest-free grace period could bail you out during an end of the month budget crisis. Just bear these points in mind while dealing with credit card grace periods.

• If you have been punctually paying (in full) all your credit card dues, banks may offer an interest break for the current billing period
• Most banks in India offer an interest-free grace period between 20 to 60 days
• In the case of cash advances or revolving balances, the interest-free period is invalid in such cases
• Set up reminders for all the important dates to make sure you don’t miss out on any
• When you miss a payment, the bank will charge a penalty fee and the outstanding amount will incur hefty interest

Once you consistently begin paying off all your credit card dues, banks will start offering you the benefits of interest-free periods in no time!