How Does a Credit Card Billing Cycle Work?

ByG. Dautovic
April 19, 2022

Every credit cardholder needs to be familiar with a few key terms and processes in order to understand how this financial instrument works.

The billing cycle is an important part of the jargon and refers to the period of time between the end of one billing period and the next billing statement date. 

Billing cycles typically range between 28 and 31 days. At the end of each billing cycle, cardholders are given a certain amount of time to make their payments.

This is referred to as the grace period, and customers who cover their balances during this time don’t incur interest.  

Definition and Example of a Billing Cycle

Credit cards are among the most popular financial instruments, allowing you to borrow money from a lender and then pay it back over time. If you use a credit card responsibly, you can enjoy a range of financial benefits.

That’s why it’s important to familiarize yourself with the billing cycle. 

The credit card billing cycle is the period of time between the last statement closing date and the next billing statement date. It covers all charges made during that period of time, which is determined by the card issuer and doesn’t exceed 31 days.

Each month, your credit card issuer will send you a bill for all purchases made during the billing cycle. With most issuers, you’ll get a grace period between when the statement is issued and when your payment is due. 

Let's say you start using your credit card from the first of the month. In this case, the billing cycle for your credit card starts on that day and ends 28 to 31 days later. Your payment is due on the date specified by your issuer.

If you fail to make the payment on time and in full, you'll be charged interest on the outstanding balance. The interest will show on your next billing statement.

How Does a Billing Cycle Work?

The date chosen for the start of the billing cycle depends on various factors. For example, it can begin on the day chosen by the card issuer or when the account is opened.

The billing statement includes your opening balance, transactions made since the last statement, and the closing balance.

The due date for the payment is displayed on your statement. If your issuer offers a grace period, the bill must be delivered to the customer no later than 21 days before the credit card payment due date.

Most issuers add an additional few days for the mailing and printing of the statement. Cardholders cannot be charged interest during this period.

Your credit card issuer will report your payments to the credit bureaus. Making payments on time and in full will contribute to building a good credit score. 

When cardholders fail to make the payments and are charged interest, the interest rate is based on their APR or the annual percentage rate. The APR can vary depending on the type of card you have.

Generally speaking, the higher the APR, the more expensive it is to carry a balance on your credit card.

Understanding your credit card billing cycle and the due date can help you budget and avoid late fees. Failing to make monthly payments can also result in the loss of your grace period and interest on new purchases and affect other aspects of your financial health.   

How Your Billing Cycle Affects Your Credit Score

Your credit score will suffer if you don't pay your bills on time. This is because late payments are reported to the credit bureaus and can stay on your credit report for up to seven years. So, if you're trying to improve your credit score, it's important to cover your statement balance each month.

What Is a Credit Card Minimum Payment?

Now that we know how credit card billing cycles work, it’s time for a closer look at monthly payments. The minimum payment is the lowest amount of money that you can pay on your credit card bill each month.

This number is typically calculated as a percentage of your total balance and is usually around 2-5%. For example, if your total balance is $100 and your minimum payment is 3%, you owe at least $3 to keep your account in good standing.

However, if you only make minimum payments, it will take you longer to pay off your debt, and the issuer will keep leveraging interest on the remaining amount. Furthermore, making minimum payments during the credit card cycle date can hurt your credit score.

Can You Change the Dates of a Billing Cycle?

Some banks and issuers may allow you to change your credit card billing cycle dates. For example, if you get paid on the first of the month but your credit card bill is due on the last day of the month, you may want to consider changing your billing cycle.

While some card issuers that allow billing cycle changes don’t charge additional fees, others do. Some issuers may charge around $10 for changes to your billing cycle.

If you're considering changing billing cycles for credit cards, it's important to weigh the pros and cons. On the one hand, you may save money on interest charges by aligning your billing cycle with your pay cycle. On the other hand, you may end up paying more in fees if your issuer charges for this service.

What Are Late Fees?

Late fees on credit card billing cycles can vary depending on the issuer. However, most late fees are around $25-$35. If you're trying to avoid late fees, it's important to make your minimum payment by the due date.

Bottom Line

Understanding your credit card billing cycle is important for budgeting and avoiding late fees. Your billing cycle can also impact your credit score, so it's important to make your payments on time. If you need to change your billing cycle, some issuers will allow you to do so for a fee.

FAQ

How do I know my credit card billing cycle?

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Your billing cycle is on your monthly statement. It is the time between the last statement closing date and the next billing statement date. If you're unsure about all of the important credit card dates, such as the length of your billing cycle or the grace period, you need to check your terms of service or contact the card issuer.

What is a credit card billing cycle?

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The billing cycle is the time period between two consecutive credit card statements. This time period can vary depending on the credit card issuer, but it typically ranges between 28 and 31 days.

What happens if I only make the minimum payment?

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If you only make the minimum payment on your credit card bill, the bank will keep adding interest on the remaining amount, and it will take you longer to pay off your debt. This can also hurt your credit score.

How long is a bank billing cycle?

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The credit card billing cycle can be anywhere from 28 to 31 days. It always begins and ends on the same day every month. Most banks give customers several weeks to make the payments after the statement is issued.

About author

I have always thought of myself as a writer, but I began my career as a data operator with a large fintech firm. This position proved invaluable for learning how banks and other financial institutions operate. Daily correspondence with banking experts gave me insight into the systems and policies that power the economy. When I got the chance to translate my experience into words, I gladly joined the smart, enthusiastic Fortunly team.

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