One of the most important factors a person considers when choosing a credit card is the interest rate. The interest rate is the rate which is computed on the card on a yearly basis. The grace period is the number of days remaining before you make your outstanding payment in full, so that you are not billed finance charge.
The fine print of credit card companies reads grace period as a specified amount of days from the statement date, given the fact that you have paid your previous balance in full by the due date. The grace period is usually related to new purchases and not for ‘revolving’ purchases. That means, if you carry over your balance of the previous month, you do not get a grace period. On the contrary, you are charged interest on the spot for the purchase made, which is added to interest of the previous unpaid balance. Credit cards generally, do not offer a grace period for balance transfers and cash advances. Interest rates on cash advances are quite higher compared to credit purchases and they are levied from the time, a cash advance is taken.
The grace period is something which tends to work against the ‘profit making’ principle of credit cards. Credit card companies know that if the money is paid in full or if the credit is kept interest free for a certain amount of time, then they will lose on making money through financial charges. This was the main reason why the usual 30 day grace period has been changed to 20-25 days. In fact most credit card companies are trying to scrape the system of grace period altogether.
Nowadays with the reduced grace period and hefty late fees, the credit card companies are laughing all the way to the bank. It is always important not to be late on your credit card payments. Apart from being slapped a late fee, you can also be reported negatively on the credit report, if you hesitate making a credit card payment promptly Also, if you are late on your payment even once, the credit card company can hike the interest rate that you pay. The worst thing is that your credit card company can hike the interest rate even on the basis of your making payment late to other lenders and credit card companies to.
Credit card companies “want” you to have outstanding balances that you can carry over and repay as well. Of course, the credit card companies do inform you, as a requirement of Federal Law and Truth in Lending Act (TILA) about the hike in the interest rate by giving you a 15 day notice. However credit card companies can underplay this fact by mentioning it in fine print. You should make it a point to read about things like bill cycle, interest rates, late fees and grace period comprehensively to save yourself the desperation and tension later.
Daniel Cohen recommends Find Credit Cards for finding a First Premier Bank credit card.
