Which term describes the period during which purchases are made but interest is not charged if the balance is paid in full by due date?

• A. Minimum Monthly Payment
• B. Billing Cycle
• C. Grace Period
• D. Annual Fee

Answer: (C)

Grace period is the span after the billing cycle ends and before the due date during which new purchases won’t be charged interest, as long as you pay the full statement balance by the due date. This is the period that rewards paying in full, preventing interest on those purchases. If you carry a balance, the grace period typically doesn’t apply, and interest starts accumulating on new purchases. The other terms don’t describe this interest-free window: a minimum monthly payment is just the smallest amount you can pay to stay current; the billing cycle is the time period over which transactions are recorded and a statement is generated; an annual fee is a yearly charge some cards impose, unrelated to interest timing.