grace period

1. A period in which a debt may be paid without accruing further interest or penalty.
2. A period in which an insurance policy is effective even though the premium is past due.

A provision in most loan and insurance contracts which allows payment to be received for a certain period of time after the actual due date. During this period no late fees will be charged, and the late payment will not result in default or cancellation of the loan. A typical grace period is 15 days.

Investopedia Says:
A grace period is usually the only a feature of a loan on which interest is calculated monthly, if it is calculated at all. Under some loan contracts, payments outstanding during grace periods are interest free, but the majority have interest compounding during the grace period. Be sure to check your loan contract for the specifics on any grace periods.

Credit cards for example, on which interest is calculated daily, do not have any grace periods.

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Period of time provided in most loan contracts and insurance policies during which default or cancellation will not occur even though payment is due.

Credit cards: number of days between when a credit card bill is sent and when the payment is due without incurring interest charges. Most banks offer credit card holders a 25-day grace period, though some offer more and others fewer days.

Insurance: number of days, typically 30, during which insurance coverage is in force and premiums have not been paid.

Loans: provision in some long-term loans, particularly Eurocurrency syndication loans to foreign governments and multinational firms by groups of banks, whereby repayment of principal does not begin until some point well into the lifetime of the loan. The grace period, which can be as long as five years for international transactions for corporations, is an important point of negotiation between a borrower and a lender; borrowers sometimes will accept a higher interest rate to obtain a longer grace period.

The period during which one party may fail to perform without being considered in Default.

Example: Rent is due on the first of each month, but the tenant requested and received a 10-day grace period from the landlord. If rent is paid on or before the 10th, the tenant is not in default.

A specified time, after a plan’s premium payment is due, in which the protection of the plan continues subject to actual receipt of the premium within that time.

In insurance law, a period beyond the due date of a premium (usually thirty or thirty-one days) during which the insurance is continued in force and during which the payment may be made to keep the policy in good standing. The grace period for payment of the premium does not provide free insurance or operate to continue the policy in force after it expires by agreement of the parties. Grace period may also refer to a period of time provided for in a loan agreement during which default will not occur even though a payment is overdue.

Please help improve this article by expanding it. Further information might be found on the talk page. (September 2007)

Look up grace period in Wiktionary, the free dictionary.

A grace period is a period of time past the deadline for fulfilling an obligation during which a penalty that would be imposed for being late is waived. Grace periods, which can range from a number of minutes to a number of days or longer, depending on the context, can apply in various situations, including arrival at a job, paying a bill, for meeting government or legal requirement, or in many other situations. ^[1]

In law, a grace period is a period of time during which a particular rule exceptionally does not apply, or only partially applies. For the grace period in patent law, see novelty (patent).

Contents 1 Types of grace periods 2 Advantages and disadvantages 3 Credit cards 4 See also 5 References

Types of grace periods

Some companies and organizations do not view one who fulfills an obligation within a grace period any differently. In these situations, a subject who is past due, but who meets the obligation within the grace period receives equal treatment and no penalty or negative reputation.

Other clients may receive a partial, less severe penalty. For example, many utility companies will charge a small late fee for those who do not pay their bill by the stated due date. However, the utility service provider will wait a longer period of time before cutting off service.

Some companies may suspend certain privileges during a grace period. For example, self storage services will often waive a late fee if the rent is not paid for up to several days past the due date, but will deny the tenant access to his/her unit until the bill is paid. ^[2]

Advantages and disadvantages

Grace periods can provide some advantages. For example, people who habitually are on time for their obligations, but due to occasional unforeseen circumstances are late on a rare occasion, can avoid a penalty for being late within the grace period and maintain their reputation for timeliness.

However, habitual procrastinators may come to view the grace period as the actual deadline, and if, due to unforeseen circumstances, they are occasionally late beyond that, they might complain about the applied penalty.^[3]

Credit cards

In personal finance, a grace period is the period during which no interest is charged on a credit card. See Credit card interest for further information.

A period of time after a payment due date within which the fee can be paid without penalty. For example, late charges may not be incurred for rental payments due on the first of the month if they are paid on or before the 10th of the month.^[4]

See also

• Late fee
• Turn-off notice
• Grandfather clause
• Sunset clause

References

1. ^ http://exchanges.state.gov/education/jexchanges/participation/grace.htm Grace Periods in the context of Government
2. ^ http://home3.americanexpress.com/corp/consumerinfo/grace.asp An extensive tutorial on the types of Grace Period and their implementation
3. ^ http://www.usatoday.com/money/perfi/columnist/block/2005-05-23-student-loans_x.htm A USA Today article discussing the pros and cons of Grace Period
4. ^ http://partners.leadfusion.com/leadfusion/aol/home02/gloss.fcs?glossKey=GracePeriod Grace Periods in the context of Credit

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