You should understand the concept of a billing cycle if you use a credit card. Understanding a credit card billing cycle enables you to plan your finances better. But the idea of a billing cycle is not exclusive to credit cards alone – it is also fundamental to utility and subscription services as well as mortgages, among others. Failing to understand this concept may lead to credit card charges if you default on payment terms.
What is a credit card billing cycle?
The idea of a credit card billing cycle is not as hard as you think. It is simply the space of time or the number of days between one billing period to another. In short, it is a preset period – usually 27-31 days – your credit card company considers to calculate your purchases, balance, fees, and charges and sends you a billing statement for payment.
This means your credit card issuer is tabulating your fuel, grocery, electronics, dining, travel, shopping, rent, and other purchases made with your credit card within a particular time frame known as the billing period. The totality of your purchases is added to whatever fees you have incurred and any balance you have on the ground and sent to you as your billing statement.
Your billing statement for a billing cycle is sent to you on a statement date – the day you receive your statement. Payment dates are listed in your statement, and these are the dates you must clear your outstanding amount or pay the minimum balance so as not to incur interest or charges on your card.
Further facts about your billing cycle
Billing cycles are not fixed – they differ from company to company. The typical days for one company may range from 27-31 days, and that of another may range from 25-30 days. The typical gap of days may be longer or shorter if the closing date for the account falls on a weekend or major holiday.
Some credit card issuers use a fixed date for calculating billing periods. They start from the date the user registers for the card or the date it is issued or activated. Others simply pick the first day of the month. But if you are unsure of your next billing cycle, check the date on the last statement issued to you, and everything will be there.
Also, the type of credit card applied may determine the billing cycle adopted by the issuer. But whatever the case, you have up to 21 days – from your statement date – to settle the minimum or entire balance on your statement. Sometimes, it is possible to set a new repayment date with your credit card company if your finances are tight.
Billing cycles and charges
It is best to clear your credit card balance when you receive the billing statement in the mail. Although you have several days ahead of you to do the needful – as well as a grace period if you fail to meet up – clearing the payment immediately puts your mind at rest. While you are not mandated to pay up the entire balance on your statement, you must pay the minimum amount indicated on the bill.
Although paying up the entire balance is best, paying off the minimum balance is better. This will put you in good standing with your credit card issuer, and you won’t have to pay any credit card charges or late fees, but it will carry over your balance to the next billing cycle with additional interest. Failure to pay the minimum balance will attract penalties, impact your credit score, and imperil your financial independence.
Your credit card billing cycle is central to the integrity of your card and must be taken seriously. Reviewing your billing statement carefully to ensure it reflects your actual expenditure and cash withdrawals and fees without any accounting errors is a good idea. If you observe any errors in your statement, contact your credit card company to file a complaint and seek changes.
This guide clarifies that your credit card billing cycle is the time between receiving one billing statement and another. It explains the factors influencing billing cycles and how to stay on top of your credit card statement. This article also covers the potential charges for late payments on your billing.