Understanding the Billing Cycle of Credit Cards

A Billing Cycle/Billing Period is the duration in which charges against a recurring service/s you use, are accounted for and recorded. These charges reflect in a billing statement. You will receive the same at the end of the billing cycle. For instance, if a credit card statement is released on the 11^th of every month, then the billing cycle begins from the 12^th of the earlier month and lasts till the 11^th of the current month. A billing period can be for any service, such as that for financial accounts, mortgages, loans, utility services, subscriptions, etc.

Let us now know the details that you will find in your credit card billing statement:

• Purchases and payments are done during the billing cycle
• The previous balance
• The interest on the outstanding balance
• The fees you owe, if any (balance transfer fee, late fee, etc)
• The minimum payment you have to pay and its payment/due date
• Based on your payments, fees, interest, purchases – the new balance for the statement period

Features of a Credit Card Billing Cycle

Here are the features:

• The billing period starts from the day the credit card activates.
• The balance on the card could be zero. But it may contain other applicable charges, such as the joining fee if any.
• All transactions are done on the card starting from the card activation day to the billing cycle’s end get added to the credit card bill.
• The billing statement will also display other financial charges (if any), such as cash withdrawal charges, interest, etc.
• In case of reimbursements or cashback to your credit card such as reversal of a payment, fuel surcharge waiver, etc, the same will display as ‘credit’ in the billing statement. This amount will be subtracted from the billing amount.
• At the end of a billing cycle, the credit card bill will be sent to you after considering all credits and debits.

How Long Does a Credit Card Billing Cycle Last?

The length of a billing cycle for the credit card may vary:

• A billing cycle of a credit card can also be shorter or longer than a month.
• In the majority of situations, the length is up to 27 days to 31 days or even more than the number of days in a regular month.
• Sometimes, the creditor may extend the billing cycle date to another day, if it falls on a weekend.
• A few billing cycles may begin and end based on the credit card provider.
• It may also be based on the date the account is opened.
• Or it can start on the month’s first day and carry till the last day.

Illustration: For instance, the credit limit on your card is Rs. 1 lakh. Out of this approved limit, you use Rs. 60,000 for purchases. Thus, the credit card balance will be Rs. 60,000. The credit limit that you can now avail of is Rs. 40,000 within the billing cycle or up to the time the credit limit is sanctioned for.

NOTE: You will keep receiving the monthly statement even if you close the account but have the remaining balance to pay off.

Statement Date, Payment Date, and Billing Cycle

Several people confuse statement date, payment date, and billing cycle. Once you are clear on these concepts, you will have clarity about how much time you have to pay the balance without interest. Let’s understand the differences between these three facets:

• The closing date or statement date is the day when the service provider sends the billing statement to you.
• The statement date is usually 21 days before the date by which you should pay the bill i.e. payment date.
• After the provider sends the billing statement, the new charges, if any (in case you do not pay off the same before the payment date) will show in your next statement.
• You should pay at least the required minimum amount if not the entire balance to maintain your account’s standing.
• In a few cases, the credit card company may allow you to negotiate the payment date to suit your financial needs. In other instances, you may be allowed to pick the payment date yourself.
• A late fee will apply to the balance and the APR (Annual Percentage Rate) affected if you do not pay the minimum balance within the payment date.
• Even then if you keep missing the payments, then your account will be counted in the defaulter’s list and sent to collections.

Intro APR and Credit Card Billing Cycle

In the introductory period, the provider may allow purchases interest-free or at low rates for a set number of billing cycles. You have to however pay the minimum monthly payment on your card to enjoy the low rate during intro APR. This practice will also help build your credit score.

Grace Period and Billing Cycle of Credit Card

The grace period falls between the statement and the payment date. Interest is not applicable until the payment date. So, if you pay the balance before the end of the grace period, then no interest is charged at all.

• Interest will apply to the new balance if the balance is carried over to the next pay period.
• In this case, you have to forgo the grace period till the time you pay the entire balance on the credit card.
• Remember to check the specifications about the grace period in the credit card agreement. There is a possibility that certain transactions may not qualify for the grace period such as cash advances.

Credit Card Billing Cycle and Credit Report

Your credit report gives an overview of your credit account – credit limit, payment history, monthly payment, missed payment, defaults, etc. The credit card provider will report your credit card account to one of the three major credit bureaus: TransUnion, Experian, or Equifax. The service provider updates your credit report usually at the end of a billing cycle or account statement closing date.

• The provider will report to the credit bureau, the account standing as it is on the last day of the billing cycle.
• In case you wish the credit report to show that there is zero balance on your card, then it is advisable to pay the balance before the end of the billing cycle.
• If that is not done, then it will take another billing period for a zero balance (considering you clear off all the balance due) to show on your credit report.

Things to Know in Case of Errors in the Credit Card Billing Statement

Here are a few things you need to know more about credit card billing cycles:

• In case of identity theft, there is a risk that the billing statement may have a few errors. This is why you must recheck your statement time and again to understand the breakdown of the charges and costs.
• If there are errors, then you can raise a dispute with the issuer by dropping an email or written letter within 60 days of spotting the error.
• If your card is used fraudulently used or stolen, you must notify the card issuer immediately to get the card blocked/put a request for resolution.

Frequently Asked Questions about Credit Card Billing Period

Here are the credit card billing cycle FAQs:

1. Where do the charges post a billing cycle reflect?

Basically, a billing cycle is the time period between the previous and current credit card statement. Any transaction done after a specific billing period will reflect in the next credit card statement/bill.

2. How is a calculation period different than a billing period?

The calculation period is the duration wherein all the credit card costs (non-cash transactions and cash withdrawals) are accounted for. On the other hand, the billing cycle starts after the calculation period ends.

3. How to find a billing cycle of credit card?

Check your latest credit card statement to know your credit card billing cycle. If you wish to calculate the number of days for a particular payment cycle, then count the number of days from the beginning to the last of the payment cycle.

4. What is the significance of minimum payment on a credit card?

The minimum payment is the required amount you can pay on or before the payment due date to maintain your credit card account. But, if you just make the minimum payment, and leave the pending amount to be paid later, then the creditor will levy interest on it.

5. Can you change a billing cycle?

You may have a word with the bank/creditor that issues the credit card about changing the billing cycle if required. However, remember that it is not possible to alter the payment due date, which is based on the billing period.