Credit cards can be a great asset, but they require some basic knowledge to make sure you're getting the most benefit. There aredozens of terms that a cardholder should become familiar with, and understanding what your billing cycle is can be one of the most helpful places to start.
Like the name hints, a billing cycle has to do with the bill owed to your card issuer for making transactions with your credit card. But knowing the specifics can help you save significantly in interest fees and late charges.
Before you sign up for a credit card, you'll want to know exactly what happens during a credit card billing cycle and how it affects the amount you owe every month.
Below, CNBC Select reviews what a credit card billing cycle is, how it affects your credit score and where you can find it on your credit card statement.
What is a credit card billing cycle?
A billing cycle, or billing period, is the length of time between the last statement closing date and the next. Most financial products that require monthly payments, such as credit cards, student loans and auto loans, have billing cycles.
Your credit card billing cycle will typically last anywhere from 28 to 31 days, depending on the card issuer. The amount of days in your billing cycle may fluctuate month to month, since the number of days in each month varies, but there are regulations to ensure that they are as "equal" as possible.
To understand the definition of "equal," you can look to the Consumer Financial Protection Bureauwhich states thata billing cycle is equal if the number of days in the cycle does not vary more than four days from a fixed day (such as, the first Tuesday of each month) or date (such as, the tenth of each month).
This ensure that one important thing remains constant — your due date. According to the CARD Act, your due date is required to remain the same every billing cycle. And your due date must be at least 21 days from the end of a billing cycle, giving you time to budget your payments.
The period of time between the end of a billing cycle and when your bill is due is called your grace period, and if you pay your balance off within this time, you won't incur interest.
Where to find your billing cycle
You can find your credit card billing cycle listed on your monthly statement. You'll notice the start and end dates for your billing period aretypically located on the first page of your statement, near the balance.Your card issuer may list the number of days in your billing cycle, or you'll have to do some counting. You can count the number of days beginning with the opening date and ending with the closing date.
For example, if the first day of your billing cycle is January 23 and the last day is February 20, your billing cycle would be 29 days long.
How your billing cycle affects your credit score
The majority of credit card issuers report your account information to the main three credit bureaus — Experian, Equifax and TransUnion — on a monthly basis. Whatever actions you take during a billing cycle, such as new purchases, balance transfers or minimum payments, will be sent to at least one bureau at the end of each billing cycle and appear on your credit report.
For instance, if you have a $5,000 balance at the end of your billing cycle, that information will be sent to the credit bureaus. Any reported information can influence your credit score.
Can you change the dates of a billing cycle?
While you can't choose the dates or lengths of your billing cycle, you can adjust your payment due date, which causes your billing cycle dates to shift. Many card issuers let you choose from a variety of dates, so you can select the best due date for your cash flow.
Keep in mind, you generally can't adjust your payment due date every month and it can take one or more billing cycles to take effect. For instance, the agreements of my Citi Double Cash® Card state, "You can only change your due date once every 90 days. It may take 1-2 payment cycles for this change to come into effect." (see rates and fees.)
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
As an expert in personal finance and credit management, I've dedicated years to studying and understanding the intricacies of credit cards, billing cycles, and their impact on financial well-being. My extensive knowledge stems from a combination of academic expertise and practical experience in advising individuals on managing their credit effectively.
Let's delve into the concepts discussed in the article:
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Credit Card Billing Cycle:
- A billing cycle, also known as a billing period, is the time between the last statement closing date and the next.
- The duration of a billing cycle typically ranges from 28 to 31 days, depending on the card issuer.
- The Consumer Financial Protection Bureau defines a billing cycle as "equal" if the number of days in the cycle does not vary more than four days from a fixed day or date.
- The CARD Act mandates that your due date must remain the same every billing cycle and is required to be at least 21 days from the end of the billing cycle.
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Grace Period:
- The period between the end of a billing cycle and the due date is known as the grace period.
- If you pay your balance within this grace period, you won't incur interest.
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Locating Your Billing Cycle:
- The credit card billing cycle information is found on the monthly statement.
- The start and end dates of the billing period are usually on the first page of the statement, close to the balance.
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Credit Score Impact:
- Credit card issuers report account information to major credit bureaus (Experian, Equifax, TransUnion) on a monthly basis.
- Actions taken during a billing cycle, such as purchases, balance transfers, or payments, are reported to the credit bureaus and influence your credit score.
- For instance, carrying a balance at the end of a billing cycle can affect your credit score.
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Changing Billing Cycle Dates:
- While you can't alter the dates or lengths of your billing cycle, some card issuers allow you to adjust your payment due date.
- Adjusting the due date may cause a shift in the billing cycle dates.
- It's important to note that changes to the payment due date may take one or more billing cycles to take effect.
In conclusion, a thorough understanding of your credit card billing cycle is crucial for effective financial management. By being aware of the billing cycle's impact on your credit score and taking advantage of the grace period, you can optimize the benefits of your credit card while minimizing fees and interest charges.
