What is the credit card grace period?

• A. The time between purchase and interest accrual when paying the balance in full.
• B. The time you have to dispute a charge.
• C. The period after a late payment where penalties apply.
• D. The window to apply for a new card with a 0% APR.

Answer: (A)

The idea behind a credit card grace period is an interest-free window after a billing cycle ends. If you pay the full statement balance by the due date, you don’t pay interest on new purchases for that cycle. In effect, purchases during the cycle can be kept interest-free as long as the balance is paid in full when the bill is due. If you carry any balance, you lose that grace period and interest starts accruing on new purchases from the date you bought them until the balance is paid off. Cash advances and many balance transfers usually don’t have a grace period and start accruing interest right away. The exact length of the grace period varies by issuer, but it’s typically around 21–25 days.