What does billing cycle mean on a credit card?

What the billing cycle means is nothing more and nothing less than the billing cycle of a credit card or any other type of account that is calculated each month. In simple words, we could say that it is the time that elapses between the issuance of one invoice and another or, more specifically, the period used to calculate that invoice.

For example, a billing cycle could start on the first day of the month and end on the last day, but it could also start on the 15th of one month and end on the 15th of the next month. Credit card billing cycles vary in length and generally depend on the issuer.

Most of the billing cycles have an approximate duration that goes from 28 to 31 days, but we will see this later.

What is the billing cycle of a credit card?

When a user receives a new credit card, their billing cycle begins and, most of the time, they start with a zero balance.. Why? Because the consumer has not used the card yet. Of course, this “zero balance” has its exceptions. If the card is subject to an up-front charge such as an issuance fee, for example, or the user opted to transfer the debit balance from an old card to your new credit card, the balance may be above zero.

During the billing cycle, any purchase, expense, fee or commission generated from day one to the last, which is known as the closing date, will be added. Any installment or payment made by the consumer before the end of the cycle will also be subtracted from the debit balance. At the end of the billing cycle, the issuer or bank will total the debt and an invoice will be issued that includes all the charges and fees owed with their respective interests.

Note: If the credit card is subject to a 0% introductory APR, no interest will be applied. Any extra activity (expense, commission or fee) that you carry out after the closing date of the billing cycle will be reflected in your next account statement.

What is the best time to pay the credit card?

Although the billing cycle represents the monthly cycle of operations of your card, This does not mean that you have to wait for the account statement to be issued to pay your debit balance.. As a user, you have the right to log in whenever you want to check the current balance and make a payment, either a credit or, if you can, a cash payment. In fact, experts recommend reviewing the card account frequently, as this will allow you to make sure that all charges are legitimate (that were approved by you) and know the amount of revolving credit you still have available.

Remember: The next billing cycle will start with the outstanding balance totaled at the end of the cycle. When your account statement arrives in your email or by post, you will only see the initial balance -which, in the first billing cycle, is usually zero- and the final balance, in addition to all the operations -expenses, payments and credits – that you did during the duration of the billing cycle.

How long is a billing cycle?

This will depend directly on the issuer of your credit card. However, the due date (which is the time that the bank or issuer gives the consumer to pay the debit balance or the minimum fee) It goes from 21 to 25 days counted from the closing date of the cycle.

Therefore, the billing cycle is handled in the following way. There is a start date, a statement closing date, an invoice due date, and a period from the beginning date to the closing date of the billing cycle. This period is known as the “grace period” because the user can pay the entire balance of the card and get rid of the application of interest.

Note: By law, the due date of your credit card bill will always be the same and will not have an impact on the calculation of the start or end date of your billing cycle.. Check your credit card statement, log in to your account online, or call customer service at the number on the back of your credit card to find out the length of your billing cycle.

Remember: Keep in mind that you may not be able to enjoy the grace period if you requested a cash advance or if you transferred the debit balance from one card to another because the APR of these operations is different and, often, also linked to fees. extra.

Let’s see an example to understand what the billing cycle means

Suppose you have been offered a new credit card. The due date of your card bill is the 1st of each month. February 15 is your billing cycle start date. According to the bank, billing cycles last 25 days. Therefore, the closing date of your billing cycle will be the following March 10. When do you have to pay the balance of that bill? Before April 1.

All the expenses and credits that you make from February 15 to March 10 will be accounted for in the account statement for the month of February of your credit card. Let’s say that on March 9, you check your credit card online and notice that your current due balance is $1,500. Since you don’t want to pay a large amount of interest, you decide to make a payment of $1,000. On the day your card is closed, your debit balance will be $500. The bank will show you this balance plus the application of interest. Let’s assume that the total debit balance -with interest- amounts to $525. So the initial balance of your next billing cycle -corresponding to March- will be $525.

What about 0% APR and billing cycles?

Many issuers and banks offer credit cards with introductory fees and APRs (like Discovery it Cash Back) that are only available for a specific number of billing cycles, meaning that, for example, the 0% introductory APR won’t last. 18 months that affirms the promotion of that new credit card that you liked so much. And it is that, these 18 months are not counted by calendar, but by billing cycles. Therefore, the 0% APR will apply to 18 statements.

Suppose the bank calculates each billing cycle in 25 days. So, to continue with the example, these “18 months” will actually be “15 months” on average. Our recommendation? Guide yourself through the account statements. Each of them represents a billing cycle. This way you can calculate when the bank will start applying the regular APR of the credit card.

Where do I find my billing cycle or billing cycle?

Keeping up with credit card payments can be challenging unless you get organized. Why do we say it? Because the payment and start or end dates of a billing cycle do not usually coincide with the calendar month. So how can you prepare to pay your cards on time? In various ways:

  • You can check the account statement that the bank sends you by mail or by email. There you will find a section where you will easily identify which day your billing cycle started and which day it ends.
  • You can check your account online. On the statement, you’ll see the billing cycle’s start date, closing date, and next payment date. You will also be able to determine your current balance and how much revolving credit you have left to use.

Another important tip that you can apply is to count the number of days that pass from the beginning of the billing cycle to the end.. For example, if your last statement shows that your billing cycle started on April 15 and ended on May 12, that means your billing cycle is 28 days. To calculate the next closing date, you will only have to count 28 days from May 13, that is, your next cycle will end on June 9.

Does the billing cycle affect my credit?

Actually yes. Take into account that the country’s issuers and banks will inform at least one of the three main credit agencies in the United States (Equifax, Experian or TransUnion) how you manage your revolving credit, how many payments you make through the card , etc. This summary will also include your payment history, the credit limit used and to be used, and how much of your outstanding balance you paid in the month.

The issuer or bank will update this information at the end of each billing cycle, which of course coincides with the closing date of your account statement.

Tip: If you want your credit report shows a zero due balance, pay your credit card in full before the end of the billing cycle.

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