Grace period – it sounds nice, doesn’t it? Like a little vacation. In a way, it is – but for your credit card interest.
Previously, we broke down types of interest that can be charged, as well as the different ways they can be applied. Now, we explain the payment window that allows you to put your credit card interest on a short pause.
Your grace period is a period of time where you won’t be charged interest on new credit card purchases – so long as you pay off your full balance before the payment due date on your statement.
Say you’re out for a coffee run. When it’s time to pay for your order, you reach for your credit card. That purchase, along with any other purchases made within the same statement period, will remain interest-free until the payment due date that’s reflected on your statement.
Be careful though ... If you don’t pay down the entire balance on time, you’ll lose the benefit of the grace period and interest will be charged on those purchases back to the date you made them. And that $2.99 cup of coffee, it’ll end up costing you more in the long run. Most Canadian credit cards offer a grace period (including all Capital One cards), so make sure to check your account terms.
Tip: Remember, not all kinds of transactions qualify for a grace period, so try to pay down those transactions (like cash advances) as soon as possible to help reduce interest charges. If you’re having a hard time keeping track of your payment due dates, payment alerts are a helpful way to stay on top of things.