Interest-Free Period on Credit Cards
Understanding the benefit of a good number of days of grace period is important, when choosing a credit card. Interest-free grace periods help you save a substantial amount every year.
Points to Remember
- Grace period is the timeframe between your bill cycle's end to the payment due date. It is only interest-free if you pay your due payments on time. If you make your payment on time in full, consistently, sometimes the bank gives you a break on interest on your card for the present billing period.
- Credit card companies are not required to provide a grace period, however most of the banks grant a grace period between 20 to 60 days in India. It is also referred to as the interest-free period. For those who struggle to make their payments on time, it may be tough to make payments in full and qualify for the grace period.
- If you carry a balance from a previous billing cycle to the next, then there is no possibility for you to enjoy the leeway of grace period on your credit card.
- However, grace period does not apply on the cash advances on your credit card issued by most banks in India. So, if you withdraw cash using your credit card, interest will be charged until the payment is fully cleared.
- If, you as a cardholder do not pay your bill on or before the due date, interest is applied on your entire outstanding amount as well as the new purchases made using the credit card.
Example
Let us try and understand interest-free period on your credit card with an example:
For instance, Seema is a credit card user. Being a first time credit card user, she makes a purchase of Rs.2200 on the first day of her billing cycle for the month. At the end of the billing cycle, she pays off her outstanding balance on the due date, clearing her balance. Therefore, she will not be charged any interest in her purchases in the next month. This is wise use of grace period.
What if, Seema left Rs.200 of her balance unpaid from the first month? The unpaid Rs.200 would start accruing an interest, right from the beginning of the billing cycle. The purchases made during the second months are also hit by interest charges. Although, it may not be a huge amount month-wise, but if Seema continues the pattern month-on-month, she could end up suffering a substantial amount of loss over a year.
Thereby, it is very important how you can save yourself from being charged interest during the grace period granted by the bank. Cardholders must remember that if credit card bill payment is not up to date and not paid in full, he or she cannot enjoy any grace period.
FAQs on Interest-Free Period on Credit Cards
- I delayed the payment of my credit card by three days. Will my credit score get affected?
No, in case you delay the payment of your credit card by three days, then your credit score will not be affected drastically provided you clear your credit card bill on time. In case you delay the payment for more than 30 days, then your credit score will get affected negatively.
- Is it bad if I clear my credit card bills multiple times in a month?
If you immediately clear your credit card bills, multiple times when the billing cycle is good, it is considered to be good financial l behaviour. Clearing your bills on time helps you improve your credit score and ensures that you are no kind of debt obligation.
- What is the 15 3 rule?
15 3 rule is a simple practice related to the payment of credit card bills. Here, you pay your bill 15 days before the end of the billing cycle, and make the second payment three days before the cycle is to end.
- What is the punishment for defaulting the payment of my credit card bill?
The penalties that might be levied on your paying your credit card bill late is that the bank will charge a late payment fee and you will also incur interest on your overall credit card amount. Apart from that your credit score will drop which will make it difficult for you to avail a loan or apply for a new credit card in the future.
- What should I do if I am unable to pay my credit card bill?
If you are unable to pay your credit card bill, then the first thing you should do is talk to the bank first and inform then regarding the issues you are facing to pay your bill. The bank will most likely help you. You can also consider some options such as balance transfer or availing a loan to pay your bill. You must surely stop using your credit card once you are unable to pay your bill on time.
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