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What you need to know about the grace period of the credit card and how to use it
Often, banks attract future customers by offering to issue a credit card with an interest-free period of use of about 60 days (the so-called “grace period”). Let’s consider how to use such a grace period when applying for a credit card: is it profitable and what subtleties exist.
How does payday lending work in Tennessee?
Payday loans are governed by the Tennessee Code Ann. 45-17-101 et seq.
How does a grace period on a credit card – payday loan consolidation Tennessee
The interest-free period allows you to use the bank’s credit funds free of charge within the limit, but for a limited time specified in the contract. Unlike a consumer loan, interest is not accrued or significantly lower than the base rate.
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At the same time, grace period is beneficial not only to customers, but also to the bank itself. When you use a credit card to make purchases in any online stores and supermarkets, the bank receives a reward from them.
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There are limits to how much you can legally borrow. If you apply online, the maximum is $425. If you apply in-store and receive a check, the maximum increases to $500. No matter how much you borrow, loan terms are limited to 31 days and lenders may charge no more than 15% of the loan in the form of fees.
You may have up to three outstanding loans at a time provided they total less than $500.
There is a billing and payment period:
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At settlement, you buy and pay for services using bank credit funds. As a rule, it is 25-30 days. Upon completion, the bank makes an account statement with all transactions during this time and sends it to the client.
The payment period begins immediately after the settlement and usually also amounts to about a month. At this time, the borrower needs to repay the debt to the card, then no interest will be accrued. The payment and settlement terms in the amount of just make up 50-60 days – this is the duration of the period declared by the bank, in which interest for use is not charged.
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It turns out that at the end of the billing period, a new one immediately begins to act, and a payment period is launched with a debt that needs to be repaid.
How is the grace period calculated by credit card
In order not to get into an unpleasant situation with debts on a loan, it is worth learning how to correctly calculate when to pay them. The bank can count the period in different ways: from the 1st of the month, from the first purchase, from the date of issue of the card, etc.
How to calculate a grace period on a credit card? There are three main methods:
1. Settlement and billing periods are considered separately (indefinite period)
During the billing period, you can make any kind of purchase. After 30 days, add up all the costs from the credit card – the final amount and will be owed to the bank. To avoid interest charges, pay your debt on time.
2. Counting the “grace period” from the very first card purchase (specific period)
There are cases that the bank establishes from the moment of payment a fixed number of calendar days, which will constitute an interest-free period. For example, you make a purchase on August 10, the interest-free period lasts 30 days – it means that you need to pay the debt before September 8. And the next grace period will start from the day of the new card purchase.
3. Calculation for each purchase separately
The obvious disadvantage of this method is that with a large number of purchases it is difficult to navigate the calculations. But if you set up regular alerts about money transactions (sms or e-mail), this is also a working solution. The main thing – do not forget to track expenses and make payments on time.
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What is important to remember about the work of the credit card grace period
It is better not to withdraw cash and not transfer money from a credit card to another card or account – the grace period almost always ceases to operate, and the commission is charged immediately. But purchases via the Internet, non-cash payment for goods and services will be a smart decision when using such a card.
The date of making the mandatory payment is the day when the funds were credited to the current account of the bank. Therefore, it is better to repay the loan ahead of time: make a payment 1-3 days before the specified date, observing the conditions and procedure for paying the debt.
Thoroughly review the terms of the grace period on the credit card in the contract, remember the information about the time of the settlement and payment deadlines.
And one more important point. Do not forget about the cashback of credit cards, where you can earn by paying for purchases at restaurants, shops, gas stations, etc. Each bank offers its own cashback program, which you can choose to meet your customer needs.