when defining a grace period on a loan it is important to note that credit cards do not have grace periods for their monthly minimum payments a penalty for late payment is added immediately after the due date and interest continues to be compounded daily 
a payment after the due date but during the grace period generally does not cause a black mark on the borrower s credit report however the term grace period is used to describe one scenario in consumer credit a period of time before which interest may be charged on new purchases on a credit card is called a grace period this grace period of 21 days is meant to protect consumers from being charged interest on a purchase before the monthly payment is due 23examples of grace periodsif a consumer has a mortgage with a due date on the fifth of every month and the contract has provided a five day grace period the payment can be received as late as the 10th of the month without the borrower incurring any penalties this is an example of a loan grace period in a mortgage loan the grace period for credit card purchases is a newer phenomenon and was established with the credit card act of 2009 before that consumer protection law went into effect some lenders began charging interest on purchases immediately after they were made even a consumer who paid off a new purchase in full by the next payment date would be charged interest before the bill was even received the act includes a provision that requires credit card issuers to give a grace period of at least 21 days for the borrower to repay the charge without incurring any interest charges on the purchase 2notably this grace period does not necessarily apply to cash advances or balance transfers the terms of these are detailed in the credit card agreement grace period vs defermentsimilar to grace periods a deferment is a period of time in which a borrower is not required to make payments on a loan usually in cases of financial hardship unlike grace periods deferment is usually not automatic borrowers typically have to request or apply for a deferment and provide documentation to show why they are unable to make payments in most cases loans continue to accrue interest during a deferment so it is wise to make any payments that you can during these periods loans may accrue interest during a deferment or grace period depending on the terms of the contract you should continue paying as much as possible to avoid paying extra further down the line special considerationsany contract that has a grace period will also include language that explains what will happen if the payment is not made by the end of that period penalties can include a late payment fee a penalty interest rate hike or the cancellation of a line of credit in cases where an asset is pledged as collateral multiple missed payments can result in the seizure of the asset by the lending institution 