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Tata Capital > Blog > Generic > How To Make The Most Of Your Credit Card Grace Period


How To Make The Most Of Your Credit Card Grace Period

How To Make The Most Of Your Credit Card Grace Period

Do you know the grace period of payment on a credit card? No, then let us talk about it. There was a time in the Indian economy when everyone preferred to use cash. Then times changed, and with demonetization, the citizens of India today largely prefer cashless transactions. Cashless means the preferred payment mode is a credit card, debit card, and wallet. Credit cards today are the preferred choice of many as this allows the user to spend today and pay later, either in full or easy monthly instalments. However, there are aspects of using a credit card that many people are not well versed with, and these should be known to handle a credit card easily. One thing about credit cards that many do not know about is the credit card grace period. 

In credit cards, what is the grace period of payment?

Not many people understand the concept and want to know about credit cards and the grace period of payment. This period is the time between the date of the month when the billing cycle ends and when the payment of the outstanding on the card is due. Depending on the bank, this period is usually 20-25 days. No interest rate is charged as long as the payment is done in this period. Post this, there are RBI guidelines for late payment charges, and the bank has to charge these. This today is provided by most companies.

RBI Guidelines for Late Payment Charges

The RBI has set rules about payment of credit card outstanding. If the outstanding amount of the credit card during the billing cycle is paid within the grace period, there is no interest charged by the bank. But if the amount is not paid in the credit card grace period, then interest will be charged on the outstanding amount on the due date.

Not only this, but the interest will have to be paid on the transactions in the new billing cycle as a fine for making the credit card payment late. This concept applies to any transactions on the credit card and not on advance cash. For the latter, interest has to be paid from the transaction date.

What is the Importance of the Grace Period?

After understanding a credit card's grace period of payment, it is important to understand the importance of the same. The RBI guidelines for late payment charges are there, but you can save money every year with the grace period. It is only after this grace period that the interest is charged. If you are a credit card user, there are some important things that you should know about:

  • The grace period is free if you pay your bills by the due date. The grace period, as mentioned earlier, is the time from the end of the billing cycle to the due date of payment. 
  • If you have not paid your dues in full and there is a balance that is carried forward, then there is interest charged as there is no credit card grace period after the due date.
  • If the dues are not paid by the due date, interest will be charged on the outstanding and the purchases of the next billing cycle.
  • The period is only for purchases and not advance cash
  • There is no credit card grace period after the due date. Most banks will provide about 20-60 days for the same, and after that, interest will be levied

How To Make the Most of Your Credit Card Grace Period?

You know the grace period of payment in credit cards, but do you know how to make the most of it? Let us find out some ways:

  • Let us say you need to buy a costly item. This can be planned and bought on the first day of the billing cycle. In this way, along with the 30 days or so of the billing cycle and more than 20 days of the grace period, you will get nearly two months to pay for the item.
  • Another thing that can be done is if your bank allows you to select your due date. It cannot be changed every month, but if allowed a few times as per the policy, it can be tweaked in the months where there is a lot of expense. It can be set to the time; there is no issue in the cash flow.
  • Knowing the grace period of payment on a credit card, you should know paying the full outstanding amount by the due date is critical.
  • You should always know the terms and conditions of your credit card.
  • Ensure the minimum amount is paid if you have not paid the full amount.

To Wrap Up

You know there are RBI guidelines for late payment charges, but do you know the banks give you a grace period? This period is like an extension to make the payment later than the end of the billing cycle, giving you the time and flexibility to plan and pay the dues. However, if you do not pay the amount, you will not only pay interest but also lose the privilege of the grace period. Thus, be careful to pay on time and plan the expenses carefully to make the most of the grace period. 

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