What are the features of a soft loan?

Banking organizations constantly come up with some innovations to attract new customers and retain old ones. Competition among financial organizations has led to the appearance of credit cards with a grace period. Now such plastic is produced in almost every bank.

The special feature of the grace period is that the cardholder can use the funds of their lender for a certain period of time without paying interest. For people who are used to constantly using credit cards, these cards have become a real gift, but to really feel the benefits of such a banking offer, you should carefully study all the features and learn how to use them.

Grace period scheme

Each grace period has a reporting period, which can also be called a billing period. This is the time during which the lender makes their purchases using the credit limit of the card. This period lasts exactly a month. In most cases, the reporting period begins on the first day of each month.

This is followed by the payment period, which is the time when a person is required to make a payment to the card, and it can be full or partial. The money will be used to pay off the debt incurred during the reporting period. Each bank sets its own minimum payment amount, which is usually 5% of the debt. Each month, up to a certain number of people must make an amount on the card not less than this minimum payment.

The reporting period and the payment period together are called the grace period. If a person at this time manages to deposit all the funds used from the credit limit to the card, then the financial organization will not charge any interest.

Not everyone knows about the reporting and payment periods. Many people think that funds can be used for free from the moment they are used because they consider the grace period to be a constant value. In fact, the maximum grace period is granted only to a person who makes a credit card payment on the first day of the month. If this payment is made at the end of the month, a person has 24-25 days to repay the debt without accruing interest (if we take into account the most common variant of credit cards with a grace period of 55 days).

When does the grace period not work?

Credit cards were invented mostly for non-cash payments. The grace period works in cases when a credit card is used to pay for services and goods through special terminals.

If a person withdraws cash from the credit limit via an ATM, then they should not count on a grace period, since they do not work in such cases. In most cases, this period will not work even if a person makes a non-cash transfer of funds from a credit card to another bank card or to a virtual wallet in Internet payment systems. Each bank can additionally come up with its own terms and conditions to get acquainted with them, just carefully read the loan agreement signed when receiving a credit card.