A billing cycle is the time frame between your last statement’s closing date and the current statement’s closing date. It is also known as the statement period and generally lasts between 21-55 days depending on the product or service.
Credit cards are great financial tools if you understand them properly. To understand credit cards you need to learn about the credit card terms. One such term is the billing cycle. So, what is a billing cycle?
Well, in this post I am going to simply explain billing cycle. Moreover, I will also cover how long your billing cycle is, when it starts, how it works, and many more related topics. So, stick here.
What Is A Billing Cycle?
A credit card billing cycle is the interval between two closing statement dates. It is also known as the billing period.
At the start of every month, your credit grantor counts all your previous month’s transactions. This means they add all the money you have lent using your credit card plus if you have any bills due from the month before. Then they show it to your statement balance. Rightly after this closing date, a new cycle starts.
All the transactions you make using your credit card during this new cycle will be shown in your next balance statement. You will get the next balance statement at the next statement closing date.
Some confuse the billing cycle with the credit card grace period. But they are completely different.
Now the time frame between the two statement dates is your credit card billing cycle. Still, confused?
Let’s look at a billing cycle example to understand what is a billing cycle in credit cards.
Credit Card Billing Cycle Example
Suppose, Mr. Jonny has a credit card. His credit card statement closing date is the 5th of every month. So, he gets to see his previous month’s credit card bill after the 5th of every month and pays the bill on the payment due date.
Now, from the day of this month’s statement closing date, a new cycle starts. This cycle stops at the next closing date which is the 5th of next month. So, from the 5th of this month to the 5th of next month is Mr. Jonny’s credit card billing cycle.
So, how long is a credit card billing cycle?
How Long Is A Billing Cycle?
Normally, credit card billing cycles can be 27-31 days long. But it might be different depending on the type of card you have.
Billing cycles are different for different credit card companies. For credit cards, they are approximately one month.
Many credit card companies offer 0% Purchase APR for up to 15 billing cycles. Many even offer 0% APR on everything. So, How many months is 15 billing cycles?
Actually, it depends on your credit grantor. However, it should be close to 14 months plus. But how many months is 21 billing cycles?
21 billing cycles should be around 19-20 months depending on your credit grantor billing cycle duration.
When Does Credit Card Billing Cycle Start?
Generally, the credit card billing cycle begins immediately after the statement closing date. So, it can be any date from the 3rd to the 7th of a month.
When your credit card billing cycle starts depends on how long your billing cycle is. So, find out your statement period duration. Then add it to your last statement date and you will find when your next billing cycle starts.
For instance, Mr. Frank’s last statement’s closing date was 5th October and the billing cycle is 30 days. So, his next billing cycle will start on the 4th of November.
Now let’s find out how the credit card billing cycle works.
How Does Credit Card Billing Cycle Work?
The working mechanism of the credit card billing cycle is simple. You spend during the billing cycle. Your credit card company keeps track of it and sends you a bill at the closing date. After that, a new cycle starts.
Credit card billing cycles are important to understand. Because each cycle gets reported to the credit bureaus.
So, after a billing cycle starts all your spending gets tracked by your credit card company. This includes
- Credit Card purchases
- Payments
- Cash advances
- Balance transfer
- Interest
At the end of a billing cycle, all of these get added together. They also add previous unpaid bills if there is any. The credit card company calculates everything and makes a balance statement at the statement closing date. Then send it to you or you can also view it online. Your card statement will include
- Your Total bill for the month.
- Minimum Payment or Interest Saving Balance
- Your bill due date.
You either pay the bill or at the minimum payment on the billing date. After that, your credit grantor reports your spending and bill-paying behavior to the credit bureaus.
Does Your Billing Cycle Affect Your Credit Score?
Yes, a billing cycle might affect your credit score in many ways. Because everything you do during a billing cycle gets reported to the credit bureaus.
As your credit card company has to report everything of every billing cycle to the credit bureaus. So, it might affect your credit score.
For example, you miss a payment during a credit card billing cycle. It will also be reported and it might have a negative effect on your credit score.
In Summary
The credit card billing cycle is not just the time between two statement dates. It has other impacts too. Because it helps you to plan your finances and get ready for the bill due date.
Moreover, by keeping track of each billing cycle, you can easily budget your finances.
