Grace Period Definition

A grace period is a specified period of time beyond a deadline in which penalties are waived. In personal finances, the grace period is almost always associated with an account payment schedule and is usually some number of days, commonly about two weeks. Thus, if your account payment is due on the 1st of every month and you paid on about the 7th of every month, you would not accrue late payment penalties because you would be paying within the grace period. Note that many utility companies assess a small fee for customers utilizing the grace period; consumers should always understand the exact nature of the grace period. When dealing with credit card accounts, the term grace period has a slightly different meaning-it indicates a period of time during which no interest charges accrue on the principal; typically, charges on the account will not accrue interest throughout the first billing cycle if the charges are paid in full by the payment due date.