Features of credit cards. What is a grace period and how to learn how to use it correctly?

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

The number of all kinds of cards in the pockets of our citizens is steadily increasing, since cash lending is already much less popular than before. Many borrowers have managed to make sure that, despite the advertising assurances of banks, this loan product is quite expensive.

Credit cards today have become a much more popular tool, but the financial literacy of most Russians is still at a very low level. Even with “plastic”, many borrowers do not know what a grace period is and how to use it correctly.

Features of different cards

Mixing the concepts of "plastic" and "credit" card, some do not distinguish between these sometimes different banking products. Meanwhile, not every "plastic" is a credit card.

In fact, any card is just a tool to access a bank account. From what type of account the card is linked to, willdepend on whether it becomes settlement or credit.

A debit (settlement) card simply allows you to pay for goods within the balance of its owner's own funds. A credit card, on the other hand, allows its owner to access not only personal money, but also a loan that the bank provides to the borrower.

Grace period concept

Any loan is issued on the principle of urgency and payment, so a certain fee is always charged for the use of money, calculated as a percentage. It is credit cards with a grace period that allow you to minimize or completely avoid it.

When deciding to use such a card, each borrower should study the rules for using it in order to get the maximum benefit from the financial instrument he has. Features of the mechanism of action of the benefit are detailed in the banking agreement. After studying its points, you can figure out what a grace period is.

In fact, it represents a certain period of time during which a preferential lending regime is in effect, namely: you can use borrowed funds without payment or pay for them at a reduced rate. The main condition here is the fact of full repayment of the debt before the end of this period.

Advantages of concessional lending

Loans with a grace period are very convenient, for example, in cases of salary delays or irregular income. However, it is necessary to approach their selection and designvery carefully, because there is a risk of not meeting your allotted grace days.

If you fail to pay off in full before the end of the grace period, you will have to part with the interest that will be accrued on the amount of borrowed funds. In this case, the total cost of borrowing can unpleasantly surprise an inexperienced borrower. Therefore, it is worth carefully studying the value of interest rates, as well as the features of calculating the grace period, before putting your signature on a loan agreement.

Calculation features

The grace period for borrowing can be for both revolving and overdraft credit cards. It is quite difficult to understand what a grace period is in each specific case. After all, the programs of different credit institutions differ both in the methods of its calculation and in the number of operations that are important for its course. In addition, the duration of the grace period is not strictly fixed. In different banks, it varies from 1 to 2 months. The most commonly used interval is 50-55 days.

The nuances of using cards with a grace period

When collecting information about what a grace period is, pay attention to several of its most important features. First of all, it usually applies only to non-cash transactions, in particular, payment by card for goods or services in trade and service enterprises.

After issuing a card with a grace period, you can start using it immediately, howeverit must be remembered that the first operation performed means the opening of a grace period for its validity. At the same time, many people forget that withdrawing cash from an ATM is also a banking transaction, and it is not preferential.

Types of grace periods

The question of when the first grace period begins is quite difficult to understand. To answer it, you need to learn the procedure for calculating the terms of interest-free lending, which banks use. Despite all the variety of loan programs for card products, there are 2 main types of grace periods:

• For each transaction made (credit tranche). It implies that during the agreed period (grace period) after the transaction, no interest is charged. They will be credited and written off by the bank only after the resulting debt is repaid.
• According to the totality of transactions made in the reporting period. Then, in order to fully use the grace period, you will have to fully repay the debt before the day that marks the end of the period. The grace period becomes a floating value, the maximum for transactions made at its beginning, and the minimum for the latest transactions.

In fact, a card with a grace period is a very convenient and "advanced" financial product that allows, with a competent approach, to borrow money from banks on very favorable principles. The only necessary condition for preferential lending is the absolute financial discipline of borrowers. You must clearly understand all the features of the selected borrowing option, carefully track all expenses and scrupulously keep records of both debited and credited funds to the card.