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Understanding Grace Periods, Minimum Payments, Paying on Time, and Credit Limits

What is a grace period?

A grace period, or “free ride” period, is the number of days you have to pay your bill in full without incurring a finance charge. If you do not pay your balance in full, you will usually not get a grace period on the balance for the following month. Most credit cards do not provide a grace period on cash advances and balance transfers.

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If you do not pay in full, make your payment as soon as you can. You do not have to wait for the due date. By paying sooner, you can reduce the interest you owe.

What is the effect of paying only the minimum due?

When you consistently pay only the minimum amount due on your card, it will take a longer time to pay off the balance. You may pay more interest, depending on the APR, terms, and amount of your balance.

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Pay more than the minimum whenever you can, and always pay by the due date.

What will happen if a payment is late?

If you do not pay at least the minimum amount by the due date, the credit card issuer will charge a late fee. Late payments may also trigger an increase in your APR.

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To help you pay on time:

Schedule payments online

Set up automatic payments from your checking or savings account

Mail your payment at least 7 days before the due date

Request a different due date that fits your cash flow better

What happens if the credit limit is exceeded?

Your credit card issuer will notify you of your credit limit when you receive your card. The limit may change over time based on changes in your usage, qualifications and needs. However, if you go over your credit limit, the card issuer may charge an over limit fee. Keep track of your transactions so that you know how close you are to your limit. The card company may charge an over limit fee for going over your limit even if they authorize the transaction.

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You can check your balance online or by phone to see how close you are to your credit limit. Keep in mind that accrued interest charges can put you over your limit. Contact your credit card issuer in advance if you anticipate that you will need a higher limit.

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