Grace period: what it means

A grace period is the time during which the bank charges no interest on your credit card balance. The condition is that you repay the whole balance before it ends. Then the borrowed money is effectively free.

If you repay only part of the balance or the minimum payment, interest is usually charged on the whole debt, often from the date of purchase. So the real cost of a credit card depends on whether you stay within the grace period.

Before getting a card, check how long the grace period lasts, which transactions it covers (cash withdrawals and transfers are often excluded) and whether there is a maintenance fee. The most accurate way to compare loans is by the real annual interest rate.

In detail, with examples: The true cost of credit: how “0%” and “low rates” turn into 50-80% a year

Related terms

Real annual interest rate Credit history Loan restructuring