April 26, 2014
How does the grace period work on a credit card? Why do you need it? When do you lose it?
How does the grace period work on a credit card? Why do you need it? When do you lose it?
The Grace period is the time on the card that you have to make your payment before you are charged interest, that period is normally a month, but if you get a cash advance you get no grace period on that money and start paying interest right away. You need the grace period so using your credit card doesnt cost you money, if you did not have it you would have some interest expense every month on your card. If you get a cash advance on your credit card it is very costly, because you will pay that high interest rate on all the balance you have on the card at the time and lost your grace period. If you use a balance transfer there is no grace period also. The minimum grace period can be 21 days.
Another fine answer, Garrett. Let’s review.
The grace period on a credit card provides you the opportunity to borrow money from the bank (buy something with the card) and then pay them in full a few weeks later WITHOUT paying any interest. This is the smart way to use a credit card. It is convenient and cost effective when used this way.
You lose it when you take that cash advance (on that specific amount) or pay less than the full amount on that credit card. You lose it? As soon as you charge something on the credit card, it is posted and it immediately starts incurring interest because their is no grace period that allows you to avoid it.
The smart approach seems quite evident here. Pay your credit card off each month in full. If you can’t? Get rid of it and start using ash or debit card. You are not ready to own a credit card.