Credit Card Grace Periods Become More Graceless

"Say goodnight, Gracie" as credit card companies say goodbye to generous grace periods. In the past you could carry a balance on your credit card account for 30 days or more before paying a finance charge. This grace period has been shrinking over the past few years. The latest instance of grace period tightening is by American Express. As of May 4, 2005, AmEx has joined other major credit card issuers by eliminating grace periods on new purchases for most of their cardholders that carry a balance (i.e. do not pay their balance in full each month).

Notice was sent to AmEx cardholders in a letter headed, "Notice of Changes to Your Agreement." Until now, as long as your outstanding balance was paid in full by the next due date, all other new charges would not incur a finance charge. For example, you might charge $500 one month, pay half the bill by the due date and then add $150 in new charges. Your finance charge would be applied to the $250 balance you did not pay off, but the $150 in new purchases would be subject to a grace period. This is no longer the case.

According to David Lazarus of the San Francisco Chronicle, Desiree Fish, spokeswoman for American Express stated that this particular policy change only "affects people who carry balances." Fish also said, "If you pay your bill in full, you won't pay finance charges."

AmEx notes that this change has already been made by most other credit card companies. Fish adds, "We're not a market leader. We make changes in line with industry trends."

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