Credit cards are very useful financial tools. They come in handy during emergencies. They enable you to spend during crises since they provide you with the luxury of paying the money later. They increase your purchasing power. They empower you to purchase things without having to worry about paying the money then and there. Nowadays, credit cards offer reward points and cashbacks according to your lifestyle. The reward points offered by shopping and travel credit cards revolve around this category. Before applying for a credit card, there are certain things, such as the credit card billing cycle, due date, and minimum payment that you must be aware of. To use it judiciously and reap the maximum benefits also, you must be aware of these things.
Credit Card Billing Cycle
The utility of the credit card, the pattern of spending, and several other aspects depend on its billing cycle. This becomes very crucial especially if you have multiple credit cards. When the billing cycle is completed, the bill on your card will be obtained. All the transactions during a billing cycle will echo on your next credit card statement.
Let us now understand what a billing cycle is with an example. Suppose your credit card statement is generated on the 5th of every month. Your billing cycle will start from the 6th of the previous month and continue till the 5th of the present month. Your credit card statement reflecting all the transactions - purchases, cash withdrawals, charges associated with finances, outstanding balance interest, EMIs, refunds, etc. for this period will be generated by the bank and sent to you. Any transaction made after the billing cycle is reflected in the next statement. For instance, in the above example, if you make a transaction on the 7th, then it will reflect in your next statement. The credit card billing cycle will differ from bank to bank and is generally between 27 to 31 days. It will also depend on the type of card you have. Sometimes, the bill delivery may be delayed, and you should contact the call center to find out.
Credit card agencies will intimate the details of every transaction in your billing cycle to credit card agencies. If you exceed the credit card limit in your billing cycle, it will affect your credit score negatively.
Payment Due Date
What is the payment due date, and how is it calculated? It is the date by which you credit the amount due to your credit card account. It will be mentioned on your credit card statement. The due date is usually 21 to 25 days after the statement has been sent or after the billing cycle ends. The period between the billing date and the due date is called the interest-free period or the grace period. Thus, the transactions conducted at the beginning of the billing cycle will have more grace time compared to the ones done towards the end. The payment should be done on or before the due date so that you are not levied with any interest or late payment charges. Meticulously paying on or before the due date will help in maintaining your credit card account in good status. Note that, if you foresee a time delay in the payment reaching the company, then you should make the payment well in advance of the due date. For instance, if you are paying by cheque, then it will take 2 to 3 days for clearance. So, in that case, you must deposit the cheque before the due date.
The minimum payment is the minimum amount required to be paid on or before your due date to maintain your credit card account. This will be mentioned on your credit card statement. It is generally 5 percent of the total bill, and in some cases, it will be fixed. The minimum payment is a great way to avoid penalties on late payment, which could go up to 1000 rupees. But, generally, you should avoid making the minimum payment, since the bank will charge interest on the outstanding credit card bill. This can be as high as 48 percent, and you will keep accumulating credit card bills.
Tip: It is good to get registered for mobile and e-alerts from the bank. They will alert you on your due date and inform you about the minimum payment. Thus, you do not have to depend on the post of the billing statement from your bank.
As soon as you receive your statement, you must make a note of your payment due date and the minimum payment. It is essential to manage your credit card billing cycle efficiently and pay your bills on time. This will help in maintaining your creditworthiness.
FAQS of Credit Card bill Cycle
1: What is the grace period?
The period between the credit card billing cycle and the payment due date is called the grace period. If you do not have any outstanding payment balance and have settled the previous credit card bills in full, then you will not be charged any interest on the purchases made during this period (With most credit cards, it works like that).
2: Is there something called the postpaid bill cycle?
Yes. There are multiple credit card postpaid plans. Users can choose from one, and in that case, the billing cycle is called a post-paid bill cycle.
3: What is the billing date?
Billing Date is the date on which the monthly statement of the customer is generated and debited to the customer’s account.
4: How much earlier than the due date can the credit card bill be paid?
You can pay the credit card bill anytime and do not have to wait for the due date. Especially when you make online payments, you just need to log in to your credit card account and settle the bill - either completely or a percentage of it.
5: Is it possible to shift the payment due date?
Yes. You can change the payment due date. Many credit card issuers let you choose from a pool of dates. You can select the date as per your convenience from the options.