Know Your Billing Statement: How To Avoid Ballooning Credit Card Debt3 min read
Having a credit card requires you to take on a lot of financial responsibility, but most people tend to forget that they need to be smart about how and when they use their card.
Itâ€™s so easy to just take out your card and swipe and go. However, that kind of behavior also makes it easy for piling debt to happen and then it gets harder and harder to pay for all the charges incurred.
Luckily, there is one simple and effective way to use your credit card wisely. And that lies in knowing how your billing cycle works.
What is a billing cycle?
The billing cycle is simply the period between credit card payments. Itâ€™s shown on every billing statement, but most cardholders donâ€™t know how it works, or how they can make use of this entire period.
By knowing your billing cycle, it is easier for you to plan â€“ and control â€“ your credit card use.
Itâ€™s conscious spending that keeps one from going over budget, whether in cash or credit. We all have that certain amount in mind for credit card spending. A cap that we can afford to pay in full every due date. This is the â€˜credit limitâ€™ we have in our heads to keep us from overspending â€” unless of course, itâ€™s a real emergency.
Knowing how your billing cycle works will help you stay within this set limit and keep you from overspending. You can track how much you spent on a certain period, with the help of your mobile banking app. Not overspending will then allow you to be more in control of how much youâ€™re paying for a certain billing period.
How does a billing cycle work?
Statement Date/Cut-off Date: July 14, 2020
Payment Due Date: August 4, 2020
In this example, the billing statement date, whether received by mail or e-mail, is sent every 14th of the month. This is also known as the cut-off date.
The cut-off date is the end of a billing cycle. All charges the day after the cut-off date will be shown on the next billing statement.
Payment due dates are usually around 20-29 days after the cut-off date. In this case, the payment due date is 21 days.
The billing cycle starts after the cut-off date. In the case of our sample statement, thatâ€™s July 15 to August 14, 2020. Within the next 31 days, all your purchases will be charged to the next statement date.
This is the crucial period where you need to monitor your purchases and see if youâ€™re still well within your set budget, and that you can afford to pay for it within the next statement date.
When is the next statement date?
After the cut-off date, your next due date will be after 21 days.
Going back to our sample billing statement, as the cutoff date is July 14, that means all purchases within the next 21 days billing cycle, will appear on August 7, 2020.
This is how long youâ€™re going to pay for these purchases. Itâ€™s important that you monitor your purchases in this timeframe, so you know you will be able to afford your next payment due date.
Count down the days or set an alarm, itâ€™s all up to you. This habit of monitoring your transactions for every billing cycle will surely save you from the grips of ballooning credit card debt and improve your credit score in the long run.