Grace Period

Definition

  • The set period of time the insured has to pay premiums. Grace periods differ from one insurance period to the next, and can range anywhere from 1-30 days.
  • Refers to the interest-free time that lenders allow between the transaction date and the billing date if card users do not carry a balance. The standard grace period is typically between 20 and 30 days. If there is no grace period, finance charges accrue immediately at the time of purchase. Those who carry a balance on their credit cards have no grace period.

Synonyms
time past deadline, period of time

Related Terms and Acronyms

  • Adjusted Balance Definition,
    • A method used by some card issuers in which they subtract all payments made during the month, then add the finance charges.
  • Average Daily Balance (ADB) Acronym, Important,
    • This is the method by which most credit cards calculate your payment due. An average daily balance is determined by adding each day's balance and then dividing that total by the number of days in a billing cycle. The average daily balance is then multiplied by a card's monthly periodic rate, which is calculated by dividing the annual percentage rate by 12.
  • Billing Cycle Definition,
    • The number of days between the last statement date and the current statement date.
  • Billing Statement Definition,
    • A monthly bill that is sent by a creditor to the customer that provides a summary of the activity on an account. This can include balances, purchases, payments, credits, and finance charges.
  • Card Holder Agreement Definition,
    • A written agreement or contract between a credit card holder and the credit issuer that details the terms and conditions of a credit card account. This agreement must include the Annual Percentage Rate, the monthly minimum payment formula, the annual fee if applicable, and the cardholder's rights in billing disputes. Changes to the agreement can be made at any time by the issuer with prior written notice.
  • Credit Card (CC) Acronym, Very Important,
    • A plastic card with a coded magnetic stripe that, when signed, entitles its bearer to a revolving line of credit, with a credit limit and interest rate determined by the borrower's income and credit report.
    A payment card that gives customers access to a revolving line of credit.
  • Minimum Payment Definition,
    • The minimum amount a cardholder must pay to keep the account from defaulting. Some card issuers set high minimums if they are uncertain of the cardholder's ability to pay. Most card issuers require a minimum payment of three to five percent of the outstanding balance.
  • Previous Balance Definition,
    • Some credit card issuers base finance charges on the amount owed by the account holder at the end of the previous billing cycle.
  • Secured Credit Card Definition,
    • A credit card that a cardholder secures with a savings deposit to ensure payment of the outstanding balance if the cardholder defaults on payments. It is used by people new to credit, or people trying to rebuild their poor credit ratings.
  • Standard Card Definition,
    • The basic card offered by issuers. Customers with higher incomes and good credit reports can qualify for the higher-limit gold and platinum cards.
  • Unsecured Debt Definition,
    • Debt that is not guaranteed by the pledge of any collateral. Most credit cards are unsecured debt, which is a main reason why their interest rate is higher than other forms of lending, such as mortgages, which employ property as collateral.
  • Zero Balance Definition,
    • What shows on a credit card customer's bill when the outstanding balance has been paid and no new charges have been incurred during the billing cycle.
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