You can definitely count on your credit bill arriving every month, thanks to your billing cycle, or the length of time between one statement’s closing and the next. But what exactly is your billing cycle and how does it work? And does it impact your credit score? Many of us aren’t too sure, even if we regularly swipe and tap our cards in daily life. So let’s take a closer look: Understanding the ins and outs of how your billing cycle works will help you use your card responsibly and avoid unnecessary fees.
Fortunately, understanding the timing of your credit card billing isn’t too difficult. And these cycles tend to work the same way regardless of the card issuer, so you won’t have to relearn the ropes even if you have many different credit cards.
Here, we’ll cover:
• What a credit card billing cycle is and how long it usually lasts
• Whether you can change your cycle
• How a billing cycle can impact your credit score
• Why knowing your billing cycle is important
Definition of a Billing Cycle
So what exactly is a billing cycle? Let’s define our terms: A billing cycle is the length of time from one billing statement closing date to the next. The exact number of days in a billing cycle may vary, but they usually last from 28 to 31 days. Also known as a billing period, this concept can apply to a variety of financial products, such as credit cards and personal loans.
Credit cards usually have monthly billing cycles and require cardholders to make payments every month. Billing periods must end on the same day of every month, such as on the last calendar day.
Put another way, the Consumer Financial Protection Bureau states that each billing cycle should be equal. “Equal” in this case means each billing period must not vary more than four days from its usual length. So your credit card bill has a rhythm to it; you can depend upon it being ready at pretty much the same time (give or take a few days) every month.
How Does a Credit Card Billing Cycle Work?
Now that you know what a billing cycle for a credit card is, let’s dig into how they function. As mentioned in the previous section, credit card billing cycles coincide with a certain day of the month. During each billing cycle, new transactions are added to your billing statement, whether for that salad to-go that you had for lunch or that unexpected dental bill. Your swipes, taps, online purchases, and credits are all being tracked and compiled. (It’s not that different from, say, your bank billing cycle and statement, or a monthly utility bill.)
Then, at the end of the billing cycle, the card issuer will send you a credit card statement, either electronically or by mail. Whether you receive a paper or electronic statement depends upon whether you opt into paperless billing. It’s important to note the due date and make a payment by that date to avoid incurring late fees on top of those already high credit card interest rates.
Fortunately, credit card billing cycles often come with a grace period, which is a time between the end of the billing period and the due date. You won’t be charged interest during this time. By law, credit card companies must deliver your statement to you at least 21 days before the payment due date.
If your credit card is paid in full between the time you receive your statement and the due date, no interest will be charged. However, if there is still a remaining balance after the due date, interest may start to accrue.
How Long Is a Billing Cycle?
The length of a credit card billing cycle can vary, but the length is usually between 28 and 31 days, just like the months of the year.
Credit card billing cycles must be as close to the same length as possible from one month to the next. But they can vary by up to four days to take into account things like weekends, holidays, and months that are different lengths.
Check your statement to find out the exact length of each billing cycle. The first page of the statement usually shows language such as opening and closing date. All of the transactions on the statement fall within that date range.
Can I Change My Billing Cycle?
Your card issuer probably won’t allow you to change some things related to your billing cycle, such as the billing period length. However, one of the things you often can change is your payment when your credit card payment is due. You may find that helpful because a different due date could suit your situation better. For instance, you can sync it up to fall after you get paid, so you know there’s money in your checking account.
Keep in mind that not all card issuers will be flexible with this, and many will only allow you to change your due date within a certain time frame. And if you do request a due date change, it may take one to two billing cycles to take effect. Hence, you should monitor your statement to watch for the change.
Also, note that your card issuer has the right to change the terms and conditions of your credit card agreement at any time. However, if they do so, they generally must notify you 45 days in advance.
How Does A Billing Cycle Affect Your Credit Score?
Your credit card billing cycle can impact your credit score if you aren’t able to pay at least the minimum due on time. That late payment (or a total lack of payment) will wind up being shared. How that works: Most credit card issuers send monthly updates to credit reporting bureaus about your credit usage. The three main credit reporting bureaus are Experian, TransUnion, and Equifax. These updates usually coincide with your billing cycle date.
On your billing cycle date, reporting bureaus may receive a variety of information about your credit usage, including any instances of late payments on your credit cards. Late payments can have a big negative impact on your credit score, so be sure you are aware of the due date on your statement at the end of your billing cycle. (By the way, paying your bills on time, all the time, can be a great way to boost that credit score.)
Why Understanding Your Billing Cycle Is Important
Now that you’ve learned about how credit card billing cycles work and how long they typically are, let’s pivot to a big-picture topic. Here’s why understanding your billing cycle is important to your financial health:
• Your billing cycle lets you know when your next payment is due and the minimum amount due. Paying the minimum will let you avoid both penalties and hits to your credit score. Paying the full amount due will avoid accruing interest.
• Understanding your billing cycle will help you budget more effectively. Because you know when you have to pay your credit card bill, you can set money aside to make your payments on time. You can request your due date be moved a bit to better suit your cash flow, if needed.
• It will help you monitor your credit card balance more effectively. That purchase you made today might not appear on the last statement issued, but it will appear on the next one. You may use your cycle’s timing to schedule purchases for the optimal time in terms of keeping your balance due in check.
The Takeaway
Your credit card billing cycle is the period of time between one billing statement’s closing date to the next. This period usually lasts between 28 and 31 days and should be as close as possible to the same length every month. Be sure to pay at least the minimum by the due date to avoid penalties and fees, not to mention hurting your credit score. You can request that your due date be moved, if that would help you better manage your budget, and you will likely have a few days’ grace period in which to pay your bill without getting hit with additional charges. Given how high credit card interest rates can be, knowing and following your billing cycle is an important part of being financially responsible.
If you want to avoid fees, another way to do that is by banking with SoFi. When you sign up with direct deposit, our linked Checking and Savings accounts don’t charge you any monthly, minimum balance, or overdraft fees. Plus, you’ll also earn a competitive APY on your balances, so your money grows faster.
FAQ
Why is a billing cycle important?
A billing cycle is important because it keeps you informed of all of your credit card activity for the month. Plus, your payment is due at the end of each cycle (after the grace period), and you want to respect that to avoid accruing additional interest and fees, as well as potentially lowering your credit score.
How long is a billing cycle for a debit card?
Your checking account or debit card may issue regular statements, and the billing cycle length is approximately 30 days. In other words, the length is similar to your credit card billing cycle, but with a debit card, the funds are automatically deducted from your bank account. You don’t get a bill to pay.
What is two-cycle billing?
Two-cycle billing or double-cycle billing is a credit interest calculation. The interest is applied to the average of the prior two months’ outstanding balance. However, the practice was outlawed with the passing of the Credit CARD Act on August 20, 2009.
Photo credit: iStock/RichVintage
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