A grace period is a length of time after a payment is due and may still be made without incurring a penalty. In this video, you'll learn a simple way to understand this concept through an easy and brief explanation. A grace period of 15 days is often included in mortgages and insurance contracts. Without this, a penalty for a late payment is added right after the due date and can be compounded daily. Penalties can include a fee, a penalty interest rate hike, or the cancelation of a line of credit. Credit cards do not have grace periods for their monthly minimums.