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Tata Capital > Blog > Personal Use Loan > What Is A Credit Card Billing Cycle?

Personal Use Loan

What Is A Credit Card Billing Cycle?

What Is A Credit Card Billing Cycle?

If you are a new credit card user and have been using it for everything, be it shopping or paying your other bills, you can count on your credit bill arriving every month, thanks to your billing cycle. But what exactly is the credit card billing cycle and due date, and how does it work?

Even if you are applying for a credit card from a lender who offers the best billing cycle for a credit card, it is crucial to understand the terms of the credit card, including the billing cycle, its due date, and the payment cycle.

Fortunately, understanding the billing cycle's meaning isn't that big of a task. So let's get right on with it.

Know What is a credit card cycle?

A credit card billing cycle is the timeframe within which a credit card bill gets generated. The billing statement for the following month reflects your current month's transactions. The monthly statement includes a record of every transaction made during this time using the credit card. All cash withdrawals, credit card payments, and EMIs made using a credit card are included.

For example, if your credit card statement is generated on the 10th of every month, the credit card billing cycle will begin on the 11th of the previous month and continue until the 10th of the current month. However, you must check with your lender about the exact duration of the billing cycle in credit cards, as it varies between 27-31 days.

However, the lender may not generate the monthly billing credit card cycle or statement if you haven't transacted and have no outstanding balance in a particular month.

How does the best Credit Card Billing Cycle work?

Now that you know what the billing cycle means and what the best billing cycle in a credit card looks like let's dig into how they function. Your billing statement is updated throughout each billing cycle with fresh transactions, such as the lunchtime salad you ordered to go or the unexpected dental cost.

Your swipes, taps, online transactions, and credits are monitored and tallied. Payments made to credit cards, such as fuel surcharge waivers or reversals, are deducted from the bill, and the final bill is generated.

However, in the case of the above example, any transaction that takes place on or after the 11th day of the current month will be included in the subsequent/following credit card payment cycle.

A bonus tip - Your credit score will suffer if you use a credit card beyond its limit during a credit card payment cycle. Therefore, pay the entire amount owing on or before the monthly cycle ending date if you want a zero balance to appear on your credit report.

What is the payment due date?

To prevent paying late fees on top of the already high credit card interest rates, it's critical to take notice of the due date and make a payment by that day. It is the date by which you credit the amount due to your credit card account, and 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 interest-free period, also known as the grace period, is the time between the credit card billing cycle and the due date of payment. You won't be charged interest during this time. Typically, the grace period is 20 to 25 days long. Therefore, you must make the payment on or before the due date to avoid paying interest or late payment fees.

This isn't to say that you are stuck with the due date forever. Most card issuers today give their customers the option to modify the credit card payment due date. To request the same, contact the relevant bank or card provider. You can adjust the due date for your payment if your lender offers the option.

What is "minimum payment" in a credit card payment cycle?

Now that you know what a credit payment cycle and due dates are, it's vital to know the difference between the total and minimum amount.

The total amount due is the complete sum that must be paid as of the statement date. In contrast, the minimum amount is the least amount that you must pay before the payment due date to avoid late fees.

It sounds easy to pay the minimum amount owed on a credit card. Even though you have a sizable credit card bill, paying a minimal amount makes it seem like your debt is manageable. However, you should realize that minimum payment can lead to the following things:

  • Firstly, an interest charge will be levied on the outstanding amount that gets rolled over to the next month's billing cycle.
  • Second, because you haven't paid in full, you forfeit the interest-free grace period, usually up to 20-25 days. You will pay interest on every new purchase until the entire dues are paid.

Therefore, if you can manage, you should pay your balance in full every month.

The bottom line

After reading the article, you may have gained a better understanding of the billing cycle's meaning, the credit card payment cycle, and the due date that you may utilize to your advantage while using the card. But you also need to check your statement every month at the end of your credit card billing cycle and try to pay the full amount due.

The advantages of having a credit card are numerous. So get your credit card from Tata Capital Now and enjoy its benefits!

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