Definition
The time between the end of a billing cycle and the due date when you can pay the full balance without interest on purchases.
What it means
Many credit cards offer a grace period on new purchases. If you pay the full statement balance by the due date, you are not charged interest on those purchases. If you carry any balance past the due date, you usually lose the grace period, and interest can start on new purchases right away until you pay in full again, often for one or two billing cycles. Federal rules under the CARD Act require card issuers that offer a grace period to send your statement at least 21 days before the payment is due. Cash advances and balance transfers usually have no grace period, so interest starts the day of the transaction. Grace periods for loans, such as a 15-day late period on a mortgage, are a different idea and are set in the loan contract.
Example
Buying $500 of groceries on a card and paying the $500 statement balance in full by the due date costs $0 in interest. Paying only $400 means interest is charged and the grace period on new purchases may be lost.
Illustrative numbers only. Your situation will differ.