NDSU Extension Service - Ramsey County


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Grace Periods are Becoming Shorter

          Grace Periods Are Becoming Shorter


          A grace period is a period of time in which someone is late with a payment, but penalties are not incurred. There are a number of different types of grace periods, but the important thing for consumers to be aware of is that, as a general rule, as long as a payment is made during the grace period, they will not be treated differently from people who pay when the bill is due.

          One example of the grace period is the period between the time a credit card statement is issued and the balance or minimum payment is due. During this period, interest will not accrue on new purchases, and the card holder can choose to pay the bill in full and avoid all interest fees. At one time grace periods were between 21 and 25 days, depending on the credit card company. In today’s financial market, for some credit card companies that has changed to 7-10 business days.

          Insurance companies often have a two week grace period which ensures that people remain covered even if their payments are late. Grace periods can also be built into bills. Rent, for example, often has a five day grace period after the due date during which received payments will not be considered late.

          During a grace period, interest fees, late fees, and other penalties will not be charged, but as soon as the period ends, the fees can start to rack up. For this reason, it is a good idea to pay bills in a timely fashion, to avoid being penalized. If a bill is due on the 15th, for example, the check shouldn't be mailed on the 14th, because this does not allow enough time for the payment to be processed.

            Be sure to check your loan contract for the specifics on any grace periods. . For example, cash advances and balance transfers don't typically have a grace period and begin accruing interest as soon as the transaction is posted to your account. Credit cards on which the interest is calculated daily, do not have any grace periods.

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