What Is a Grace Period?

What Is a Grace Period?

A grace period is a set amount of time after a payment due date during which a borrower can make a payment without incurring a late fee or having the payment reported as late to credit bureaus. Grace periods are common on mortgages, credit cards, and student loans.

Mortgage Grace Periods

Most mortgage loans include a 15-day grace period after the payment due date (typically the first of the month). A payment received on the 16th or later may incur a late fee, typically 4% to 5% of the monthly payment amount. The payment is generally not reported to credit bureaus as late unless it is 30 or more days past due.

What a Missed Grace Period Costs

On a $1,800 mortgage payment due June 1 with a 15-day grace period, paying on June 10 costs nothing extra. Paying on June 20 -- after the grace period -- typically triggers a late fee of 4% to 5%, or roughly $72 to $90, even though it's only four days past the grace window.

Credit Card Grace Periods

Most credit cards offer a grace period between the statement closing date and the payment due date -- typically 21 to 25 days. If you pay your full statement balance by the due date, no interest is charged on purchases made during the billing cycle. If you carry a balance, you lose the grace period and interest accrues from the transaction date.

Student Loan Grace Periods

Federal Direct Loans include an initial 6-month grace period after you graduate, leave school, or drop below half-time enrollment before repayment begins. Private student loans may or may not include a grace period depending on the lender.

Common Grace Period Mistakes

Thinking the grace period moves your due date. The payment is still officially due on the original date -- the grace period only delays the late fee.

Assuming a credit card grace period always applies. It only exists if you paid the previous statement balance in full; carrying a balance typically means interest starts accruing immediately on new purchases.