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What is a grace period and how does it relate to the billing cycle?

Curious about credit card billing cycle

What is a grace period and how does it relate to the billing cycle?

A grace period is a specified period of time during which you can pay your credit card balance in full without incurring any interest charges. It is the time between the end of your billing cycle and the due date of your payment.

Here's how the grace period relates to the billing cycle:

1. Billing cycle: The billing cycle is a fixed period of time, typically around 30 days, during which your credit card transactions are recorded. It starts on the first day of the billing cycle and ends on the last day of the billing cycle.

2. Statement generation: At the end of your billing cycle, a billing statement is generated by your credit card issuer. This statement summarizes all the transactions, payments, and charges made during the billing cycle.

3. Grace period: If your credit card has a grace period, it allows you to avoid paying interest on your purchases if you pay your balance in full by the due date stated on your billing statement. The grace period is typically between 21 and 25 days, but it can vary depending on the credit card issuer and the terms of your specific credit card agreement.

4. Interest charges: If you don't pay your balance in full by the due date, interest will be charged on the unpaid portion of your balance starting from the day after the grace period ends. The interest rate is typically stated as an annual percentage rate (APR) and is divided by 365 to calculate the daily interest rate.

It's important to note that not all credit cards offer a grace period. Some credit cards, especially those with higher interest rates or certain promotional offers, may begin charging interest on new purchases immediately, without a grace period.

To fully take advantage of the grace period, it's essential to pay your credit card balance in full by the due date indicated on your billing statement. This allows you to avoid interest charges and maintain a healthy financial position.

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