Grace crediting time. How to use them wisely

Advertising constantly assures us that a bank cardholder can receive interest-free debt for a sufficiently long period of time, which can be one to two months or more. Many suspect that this is nothing but an advertising trick. For serious banks, such as machinations, the picture can be greatly damaged. There is no fraud. Before signing a contract with a credit institution, it is only necessary to carefully examine its terms and conditions. So, what lies under the attractive phrase: “good adding time”?

If we speak literally, it is a deadline until the end until you can use the borrowed funds without paying interest. In theory, everything is simple, but in practice credit cards with a good grace period issued by different banks work differently.


What you should pay attention to?

First, the term “grace period” extends as a rule to payment operations for card purchases and not to cash withdrawals. Of course there are exceptions, but this point needs to be clarified before the contract is concluded.

A second mistake to card users, this assumption that it is possible to use the card “free” from the card during the time specified in the ad. In fact, this is not always the case. So if the grace period for a loan is 60 days, it does not always mean that you can withdraw money from the card at any time, refund it at that time and do not pay interest.

In more detail, the “interest-free” use of borrowed funds consists of two phases:

  • settlement (time when you can spend money on the card);
  • payment (starts after settlement and is given to ensure that the debt is fully repaid).


Interest-free money

Interest-free money

Together, these two segments promise 50, 60, or even more days of interest-free money. In the second stage everything is simple, it is a fixed number of days, which the bank indicates, often equal to 20. But the billing period can be determined differently. If a new credit card is accepted, the grace period can start at the moment:

  • card activation;
  • first selection of her funds.

In the future this period can be determined in different ways and equal:

  • the number of days remaining to the end of the calendar month;
  • a fixed number of days since the card was executed (sometimes equal to the payment period).

In the first case, if the amount was withdrawn 1 days, the grace period is 50 days (calendar month + 20 days payment period), but if you do a similar operation on the 15th day the funds will be used (15 days before the end of the month + 20 days payment time period = 35 days).

In the latter case, and this is typical of cheap plastics, the interest-free period can be up to 20 days.


What is the benefit for the bank?

What is the benefit for the bank?

It turns out: you can use the borrowed funds for free for some time. Why do credit institutions go for it? In fact, the grace period is a service that is beneficial to both parties. The user has the opportunity to make purchases on favorable terms for himself (if he has time to repay the debt on time). The bank receives a relatively large percentage (over 20% per annum) if the client does not repay the debt at the end of the interest-free phase. Incidentally, if 30,000 dollars were withdrawn from the card and 25,000 were repaid before the expiry of the grace period, interest on the use of the funds would have to be paid not more than 5,000 dollars but for the whole amount.

Therefore, after careful study of the conditions for granting funds, they can be properly managed.

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