Grace is unearned favor.
Mercy is really love in action.
This is a wonderful study to make as it's so much more than the definitions. Grace is showing favor for someone who doesn't deserve it, nor is really looking for it. Like what Jesus did for us on the cross. Grace is buying a brand new coat for a homeless person. Grace is to love your neighbor as yourself. In fact in Greek grace can be substituted for agape (unconditional love).
Mercy is both parties know the one did wrong and the one in Authority chooses to extend love over judgement. Mercy is also recognizing someone having authority over another, such as a king over his subjects, a boss over his staff, a father over a child, and that authority not executing judgment. Mercy is also a reproach and shame, such as what Jesus received on the cross.
Hebrews 4:16 (KJV)
Let us therefore come boldly unto the throne of grace, that we may obtain mercy, and find grace to help in time of need.
John 1:16 (KJV)
And of his fulness have all we received, and grace for grace.
This is a wonderful verse because when we find that our measure of grace is about to run out, we have more grace. In Greek it's:
καὶ χάριν ἀντὶ χάριτος
"and grace anti grace"
Meaning grace upon grace. In fact Paul says this too:
Romans 5:20 (KJV)
Moreover the law entered, that the offence might abound. But where sin abounded, grace did much more abound:
The Greek word for "much more abound" is ὑπερπερισσεύω huperperisseuo (hoop-er-per-is-syoo'-o) v. and means to super-abound. Meaning that if the Law was absolute, grace is more absolute with more to spare. If the Law required a $10 fine, grace super-abounds giving $1,000,000!
Mercy is almost an absolution for guilt, whereas grace is receiving something without deserving it.
In which case, God has exhibited His grace and mercy right from the time of fall of Adam and Eve.. For their action, banishing them would have been just on God's part.. But He did not.. That should be considered an act of grace right? Same way, God redeeming Israel every time they walked away..
Grace and mercy is common and same in both OT and NT? Is that a fair statement?
Yes. Mercy is from a standpoint of one before another who has authority to do harm and doesn't, whereas grace is one who gives something to another that's not required or even requested for. Like showing up late for work and the boss only winks at you and grace is when he gives you a day off because you just happened to walk by at that moment.
Now for the wrinkle: mercy is also taking punishment for your wrong doing. You're late for work and your boss takes two days without pay for it instead of you. These are simplistic examples of something almost incomprehensible of what God did for us.
I got to talking with my wife about this since I felt there was more and as she was commenting on something else, it clicked:
Grace presents God as a loving Father.
Mercy presents God as God Almighty in all His glory.
I find that Mercy is so over used that it's real meaning has been lost - case in point, this thread. Thanks to books and movies we always hear the victim yell "Mercy" before being killed. With all the words in the English language, there really isn't a proper translation for חֵסֵד (checed).
We are to fear God, but not like the Greeks - begging Zuis not to throw the lightening bolt - but as "OH WOW! How amazing! How small I am in Your presence and in Your love!" Am I making any sense?