The number of various cards in the pockets of our citizens is steadily increasing, since cash lending is already much less popular than before. Many borrowers managed to make sure that, despite the advertisements 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 still remains at a very low level. Even having “plastic”, many borrowers do not know what the grace period is and how to use it correctly.
Features of different cards
Mixing the concepts of “plastic” and “credit” cards, 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 for accessing a bank account. From what type of account the card is tied to, it will depend 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 allows its owner to get access not only to personal money, but also to a loan that the bank provides to the borrower.
Grace period concept
Any loan is granted on the principle of urgency and payment, therefore, for the use of money a certain fee is always calculated, calculated in percentage terms. It is credit cards with a grace period that allow minimizing or completely avoiding it.
Having decided to use such a card, each borrower should study the rules for using it in order to extract the maximum benefit from his financial instrument. Features of the mechanism of the benefits are detailed in the banking agreement. Having studied his points, you can figure out what a grace period is.
In fact, it represents a certain time period 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 debt before the expiration of this period.
Benefits of soft loans
Loans with a grace period are very convenient, for example, in cases of delayed salary or irregular income. However, you need to approach their selection and design very carefully, since there is a risk not to meet the grace days allotted to you.
If you fail to fully settle before the end of the grace period, you will have to part with the interest that will be charged on the amount of borrowed funds. In this case, the total cost of borrowing can unpleasantly surprise an inexperienced borrower. Therefore, it is worthwhile to carefully study the value of interest rates, as well as the features of calculating the grace period, before putting your signature on the loan agreement.
Features of the calculation
The grace period for borrowing can be both renewable and overdraft credit cards. To understand what a grace period is, in each case is quite difficult. Indeed, the programs of different credit organizations 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
Gathering 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 of goods or services in trading and service enterprises.
Having issued a card with a grace period, you can start using it immediately, but you must remember 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 difficult enough to understand. To answer it, you need to learn the procedure for calculating the terms of interest-free lending, which is used by banks. 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 accrued. They will be charged and written off by the bank only after repayment of the resulting debt.
- According to the totality of transactions committed in the reporting period. Then, for the full use of the grace period, you will have to fully pay the debt until the day that marks the end of the period. The grace period becomes a floating value, the maximum for operations completed at the beginning, and the minimum for recent transactions.
In fact, a card with a grace period is a very convenient and “advanced” financial product that, with a competent approach, allows you to borrow money from banks on very favorable principles. The only necessary condition for soft loans is the absolute financial discipline of the borrowers. You must clearly understand all the features of the chosen borrowing option, carefully monitor all expenses and carefully keep records of both the funds debited and credited to the card.