The importance of understanding your grace period

A grace period has different meanings, but it typically refers to the amount of time that you have before something (usually negative) occurs. 


For instance, if you have an auto loan that is typically due on the first day of every month, your finance company may have a 15-day grace period. This means that although your payment is due on the first day of each month, you will have 15 days to make your payment before you incur any penalties, which could include late fees. Be sure to reach out to your lender about the specific terms of any grace period that you may have.


A credit card grace period normally refers to the number of days between the date that your billing cycle ends and your payment due date. During this grace period, you typically would not be charged interest. But, this is not always the case. You should review your cardholder agreement or reach out to your credit card company to confirm the details of your grace period.


Using the credit card grace period again, your credit card company may tell you that you have a 30-day grace period before your payment is reported as late to the credit bureaus. This would normally mean that although your credit card payment was due on a specific date, they will not report your credit card to credit bureaus as late until your payment is past due for 30 days. 


The grace period and penalties that you avoid during the grace period vary by financial institution and even by loan type. If you have a credit card with a bank and a loan, you likely won’t have the same grace period for the credit card and the loan. So, be sure to contact your creditors to determine the different types of grace periods that you have on your loans or credit cards.