How Credit Card Billing Cycle Works

You are a first-time credit card holder, and just received your first billing statement. Now what?

If the dates, breakdown of fees, and computations in your credit card statement make your eyebrows crease, you may not be familiar with how billing operates.

Credit Card Billing Explained

Read this simplified explainer to help you in understanding the credit card billing cycle.

What is a credit card billing cycle?

A credit card billing cycle is the duration between the release of billing statements. It is the whole period of your credit card use, stretching from the start of the month and the end of the month.

However, the billing cycle (of credit cards or any service provider) may vary with the lengths of time and ranges from 28 days to 31 days, depending on your contract. It is generally like a pay cutoff, in which the time of service used is charged with the corresponding price.

How a credit card billing cycle works

So, how do you get billed for one whole cycle?

For credit card accounts that are newly opened, the billing cycle normally starts with zero balance, except for two occasions. First is when an upfront fee gets applied to your account, and second is when you used the new credit card as the source account for a balance transfer.

Next, within the month of the billing cycle, the zero balance begins to get added or changes in value as you use the credit card. The credit card balance includes online/offline purchases, applicable fees, credits, and finance charges depending on transactions made.

These numbers will be recorded on your account, be it an addition of values to or subtraction of values from your balance.

Then, at the end of the billing cycle, let’s say the end of the month, you will be billed for all the services and transactions you use and made within the billing cycle. That is your billing statement for the month—your unpaid fees and charges. It is either mailed to you or can be accessed online.

All transactions done after the billing cycle will be shown on the next bill. If you do not pay the whole amount for the current cycle, the unpaid balance and applicable fees will be carried over to your next bill on top of your charges for that month.

Make it a habit to check your billing statement to check for any discrepancies with your transaction history and the fees attached to these activities. You can review one bill to another to compare the values and changes.

What is a credit card payment due date?

Credit cards have different payment due dates but it’s typically about 21 to 25 days after the end of your billing cycle. It means that you have almost a month to pay for your credit card purchases before your next billing cycle ends.

The end of your billing cycle is also known as the account statement closing date. So, between the account statement closing date and the bill due date is called the grace period.

When you have paid your full balance from the billing statement of the previous month, you can also pay off your current balance within the grace period (before the bill’s due date). Remember that a grace period may not be applicable if you made a balance transfer or cash advance, or if you were unable to pay your balance in full after the previous billing cycle.

Furthermore, a credit card due date is always one the same date according to the law. Review your credit card statement or contact the customer service to ensure the duration of the billing cycle

How to identify the billing cycle

Commonly, a billing cycle does not fall exactly at the start or at the end of the month, which can be confusing for some cardholders. It can be identified by checking the credit card statement, logging into the online account, or calling the customer service department.

However, to learn how long you are being billed in one cycle, counr the number of days between the start and the end of your previous bill cycle. This will help you know when the next billing cycle will end.

How can a billing cycle affect your credit history?

In the Philippines, there are four credit bureaus, namely CIBI, CIRF, Compuscan, and TransUnion. These credit bureaus create your credit report—consolidated information about your account such as credit limit, amount of payment for each month, and payment history.

Now, if you don’t understand your billing cycle and often fail to make payments on your credit card, it will be recorded as red flags and may appear on your credit reports. Make sure to settle your balances before the end of your billing cycle because the credit report is updated at the same time with your account statement closing date.