Mercy and grace are two vital Christian terms whose meanings are often misunderstood. In short, mercy is God not giving us what we do deserve; grace is God giving us something we do not deserve.
Max Lucado puts it beautifully when he says:
"Mercy gave the Prodigal Son a second chance. Grace gave him a feast."
Both perfect mercy and perfect grace are found in Jesus Christ. Through His sacrifice on the cross, He has provided a way of escape or mercy from the consequences of sin (John 3:16; Romans 5:8). God has extended grace by providing salvation and proclaiming salvation to us through the Son, His teaching in Scripture, and through the Spirit of God at work among us. Hebrews 4:16 blends these two ideas in one powerful statement, teaching, "Let us then with confidence draw near to the throne of grace, that we may receive mercy and find grace to help in time of need."
Our only rightful response is to accept both God's mercy and His grace and accept the eternal life He offers through Jesus Christ. Through this salvation, we receive the mercy of forgiven sin and the grace of life in Christ, including eternity with Him. Jesus has come to give us life, and life abundantly (John 10:10).
By mercy, we are forgiven and God’s wrath no longer rests upon us. By grace, we have been adopted as sons and daughters of God and we call him “Father.”