What Is a Credit Card Grace Period?

A credit card grace period is an amount of time during which you won’t be charged interest on your credit card balance. The grace period for most credit cards in Canada is usually 21 days.

As long as you pay your entire balance by the due date, you will not be charged interest on those credit card purchases.

Grace periods are only for purchases made using the card and don’t apply to cash advances, balance transfers, or convenience cheques. These transactions start accumulating interest as soon as you make them.

Some people assume that the 21-day grace period starts when your credit card statement is due, but it actually begins on the last day of your monthly billing period. From that point, you won’t be charged interest on the amounts of any new purchases you make on your card.

However, if you don’t pay your credit card balance in full by the next billing due date, you’ll be charged interest going back to the purchase date. That means you effectively lose the benefits of the grace period.

Consider this example of calculating credit card interest with a grace period.

Let’s say you make a $600 purchase on April 1. The billing cycle for your credit card ends on April 16, with payment due at the end of the grace period on May 6.

To avoid paying interest, you need to pay off your entire balance by the due date. So, even if you make a $500 payment on May 5 and then pay the remaining $100 payment on May 10 — four days after the end of the grace period — you’ll be charged interest on the entire $600 balance from April 1 until the due date of May 6.

On top of that, you’ll pay interest on the outstanding $100 for the four days between the payment due date (May 6) and the date you paid off the entire balance (May 10).

» MORE: When is the best time to pay your credit card bill?

The grace period is eliminated if you don’t pay your entire balance by the due date. To get your no-interest grace period back, you need to pay off your credit card balance in full.

Depending on financial circumstances, like your cash flow, paying off your credit card can be difficult; credit card debt can grow quickly due to the high interest rate charged by most cards. If you find yourself struggling with a growing balance, consider transferring your credit card balance to help you get back on your feet.

Plan ahead and time your purchases

Now that you know how your billing cycle and interest-free grace period work, you can take advantage of them by timing any big purchases at the beginning of your billing cycle to give yourself the longest possible grace period.

This strategy gives you more time to come up with the money to pay off large purchases in full without paying interest.

However, be sure that you’ll actually be able to pay off the full balance by the due date. Otherwise, you’ll pay interest dating all the way back to when you made the purchase.

Keep good records

It’s essential to keep track of your credit card statements, billing periods, and each individual purchase. Staying on top of this information can help you pay less in interest and be more confident in your credit card use.

Set up automatic payments

A smart strategy for making sure you never miss a payment is to set up automatic payments through your online bank account. You can usually schedule them for a few days before the payment due date, just to be extra safe.

Read the fine print

Each credit card issuer has different rules and fees, so don’t make any assumptions regarding a particular card’s grace period.

Read the terms and conditions of your credit card — or have an AI tool summarize them for you — so you know what you’re agreeing to. That understanding will help you avoid accidentally incurring interest or fees.

If you’re new to credit cards or to credit card rewards programs, you can review our tips on how to avoid common credit card mistakes that can hurt your wallet.