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Understanding Credit Card Billing Cycles


The period of time between billings for your credit card is known as the billing cycle. Understanding credit card billing cycles is key to staying ahead of your account and avoiding interest charges, fees and late payments.

While the logical thing to do would be to tie them to the calendar month, that would make things too easy for you to figure out. Instead, billing cycles vary both in length and start dates and don’t correspond to calendar months. In fact, they’re usually shorter than a month!

Here’s what else you need to know.

Billing Cycles & Your Balance

Unless your new card has fees attached to it – or you transferred your balance to open a new card – your first bill with a new card should have a zero balance.

During the succeeding billing period, your charges accrue and appear on the following bill. Any charges or payments made after that point appear on the bill due at the end of the succeeding billing cycle.

Interest is then calculated based upon that balance; unless you paid it off in full during your grace period. Otherwise, the new total becomes the starting balance for the next billing cycle.

Billing Cycles & Due Dates

In most cases, your due date will fall somewhere between 21 and 25 days after the billing cycle ends.

This means you aren’t required to send in a payment for a purchase made during a billing cycle until you get the bill reflecting the purchase. However, if you do it that way, you’ll incur an interest charge on that purchase.

In other words, you can avoid interest charges if you pay your balance in full during the grace period before the due date.

Billing Cycles vs. Months

Understanding the difference between a billing cycle and a month can save you money in other ways.

For example, if you take a new card because it was advertised with a super low introductory rate for 12 billing cycles, but don’t really understand how billing cycles work, you’ll think this rate would be good for an entire year.

However, because billing cycles can be as short as 25 days, you’ll really only see that super favorable rate for 10 months rather than 12.

Billing Cycles, Grace Periods and Minimum Payments

The best way to manage a credit card is to pay your balance in full at the end of each billing cycle. Don’t wait for the due date, pay it off during the grace period. That is, the period of time between the end of the billing cycle and the due date.

If you can’t pay the balance in full, make the largest payment you can to minimize the amount of interest you’ll be charged on the balance carried forward into the next billing cycle. Always pay more than the minimum payment. While they can look very enticing, they’re a trap.

Credit card minimum payments are calculated specifically to make you pay more in interest over the long run. Even when you always pay on time, you’ll still leave a huge balance behind upon which interest will be calculated and added to the principal.

If You Need Help

If this information is getting to you after you’ve already seen what can happen firsthand, help is available to dig you out of the hole. Companies like Freedom Debt Relief can negotiate with your creditors to reduce the amount you owe so that you could clear up your debts more quickly.

However, before you sign up with one, take some time to do some research, such as reading these Freedom Debt Relief reviews, to be certain you’re partnering with an effective organization.

By following the above tips, you can avoid making late payments or falling deep into debt.