How to change your credit card billing cycle for better cash flow management

Representational image

Managing cash flow effectively is crucial to staying financially healthy, especially if you rely on credit cards for monthly expenses. One simple yet effective way to gain better control over your finances is by adjusting your credit card billing cycle to align with your cash inflows and expenses. Here’s a step-by-step guide on how changing your credit card billing cycle can help you manage your cash flow more efficiently, and how to go about it.

1. Understand your current billing cycle

Before making changes, it’s essential to understand how your current billing cycle works. The billing cycle typically runs for around 30 days, starting from the statement date and ending just before the next statement is issued. For example, if your billing cycle runs from the 5th of one month to the 5th of the next, your payment due date will generally be around 20 days after the cycle ends.

Tip: Review your credit card statements to determine your current billing cycle dates and payment due date. This helps you see how your billing aligns with your income flow and other expenses.

2. Identify your cash inflows

Whether you’re salaried or self-employed, cash flow planning requires aligning payments with your income schedule. Salaried individuals, for example, often receive paycheques around the beginning or middle of each month, while freelancers or business owners may have varying income dates.

Tip: Identify when you consistently receive funds, whether it’s a salary, invoices, or any other income source. This will allow you to shift your billing cycle to avoid any low-cash periods before receiving your income.

3. Request a billing cycle change from your bank

Most banks allow you to change your billing cycle, which can be done easily through customer service channels or online banking platforms.

Steps to request:

Contact customer service: Call your credit card provider and request a change in your billing cycle. Explain that you’d like to align your billing cycle with your income schedule for better cash flow management.

• Online options: Some banks allow you to change billing cycles through their apps or websites. Look under the “Manage Cards” or “Billing Options” section.
• Visit a branch (if required): For certain banks, visiting a branch to make the request in person may be necessary.
• Important: Confirm the new cycle with your bank and check how it impacts your payment due date. Make sure you won’t accidentally overlap cycles, which could lead to additional charges.

Choosing a billing cycle date close to when you receive your income ensures you have adequate funds to cover the credit card bill, avoiding delays or interest charges.

• Example: If you receive your salary on the 1st of every month, you might set your billing cycle to end around the 5th or 6th. This gives you 20-25 days to pay the bill, knowing that you’ve just received your income.
• Benefit: By setting a billing date that follows your income, you’ll avoid using credit to bridge gaps, reduce the risk of late payments, and ultimately lower interest costs.

Once your billing cycle aligns with your cash inflow, use this structure to plan expenses and control spending effectively.

• Monthly budget: Break down your expenses to match your billing cycle. Consider allocating funds for essentials, savings, and discretionary spending within this cycle.
• Avoid overspending: Keep track of expenses and avoid maxing out your credit limit, as the goal is to create a sustainable spending pattern that aligns with your available cash flow.
• Plan for upcoming expenses: With a predictable billing date, you can plan for larger expenses (e.g., travel, festivals, and birthdays) in advance without disrupting your budget.

Adjusting your billing cycle is a flexible tool that can be revisited. Life changes, like switching jobs or experiencing variations in cash flow, may prompt you to reevaluate your billing cycle.

• Track your spending: Keep an eye on your spending patterns and see if your billing cycle still aligns well.
• Re-request if necessary: If your cash inflow timing changes, feel free to re-contact your bank to adjust your billing cycle again.