Your Credit Card is a powerful financial tool that not only provides the convenience of easy spending but also many privileges in travel, lifestyle, entertainment, and shopping. Credit cards are like Personal Loans but with the major difference that they give you an interest-free period. For instance, the Axis Bank Credit Card offers a 20–50 day grace period along with numerous monetary benefits, like a no-joining fee and an annual fee.
Let's understand what a grace period is for a Credit Card for clarity on your payment timelines.
What is a Credit Card grace period?
A Credit Card grace period is the time gap between your purchase date and the due date of your next billing cycle. No interest is charged during this period, provided you pay the full due amount on or before the due date. This applies to online spending and card swiping. For cash withdrawals, interest is charged from the same day.
Suppose your Credit Card billing cycle is 15th Jan to 15th Feb and the due date is, say 25th Feb. If you use the Credit Card for a purchase on 16th Jan then you will have 40 days until the due date to repay the amount. No interest is charged during this time. Similarly, if you use the card on 15th Feb, you will have 10 days to repay it without interest.
How to get your grace period privilege back?
The Credit Card payment grace period comes with only one condition. You have to pay the entire amount due on or before the due date. If you pay only partially or fail to pay entirely, you will lose the grace period from the next billing cycle. You will pay interest on the outstanding amount, late fee payment charges and also pay interest on every purchase from the next billing cycle.
In such a scenario where you lose the Credit Card grace period, it is best to keep paying the amount due in full for several months continuously. Once you make full and timely payments, your Credit Card provider will most likely reactivate the grace period.
Benefits of the Credit Card grace period
Below are the benefits of a credit card grace period. Let's take a look:
- Settle your balance without accruing interest on purchases throughout the billing cycle.
- Align your payment with your budget and cashflow.
- Better management and allocation of funds.
- Improved credit score through responsible use of Credit Card.
Apart from this, you can enjoy many rewards and cashback schemes that will give you additional discounts. For example, the Axis Flipkart Credit Card gives up to 5% cashback on online spending and many other cash benefits. Using your Credit Card wisely will let you enjoy the maximum grace period on your Credit Card.
Consequences of failure to pay the bill before the grace period ends
If you do not pay or even pay partially by the due date, you will lose the benefit of the Credit Card payment grace period. Suppose your due date is 11th March and the outstanding amount is ₹5000. But you pay just ₹2000. If you use your Credit Card on 12th March, you will start accruing interest immediately.
By your next due date, April 11th, you will have to pay the entire previous outstanding amount with interest and all the amounts spent after 11th March with interest and late fee payment charges. If you continue paying partially or fail to pay entirely, you will bear heavy interest, and in some cases, the bank may stop your Credit Card facility.
Also Read: Credit Card minimum amount due: Meaning, calculation and importance
Conclusion
By paying attention to due dates, avoiding interest charges, and strategically timing your purchases, you can make the most of this grace period to effectively manage your finances and maximise your benefits.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
