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What is Credit Card billing cycle? How it works, due date and minimum payment

How Credit Card Billing Cycle Works? Get a complete understanding of the billing cycle of your credit card, minimum payments, due date, and late fees, charged by your bank.

July 19, 2019 / 09:11 AM IST

Your billing cycle will be sent to you every 25-31 days

When using a credit card, you need to be aware of several terms associated with it, one of which is the credit card billing cycle.  Understanding the billing cycle of your credit card is important for financial planning. Once you know your credit card billing cycle, you can use your card to the best of your advantage. The billing cycle refers to the period for which your credit card bill is generated. All the transactions that happen during the billing cycle will reflect in your next statement.


What is the billing cycle?

Let us take an example to understand what billing cycle means. Let us say your credit card statement is generated on the 4th of every month. Your credit card billing cycle will start from the 5th of the previous month and continue till 4th of the current month. During this period, all transactions done on your credit card will show up in your monthly credit card statement. This would include all credit card payments, cash withdrawals (if any) and also continuing EMIs on your credit card.

Here we have considered a billing cycle of a month. Credit card billing cycles may vary from 27-31 days. Your billing cycle will depend on your type of your card and your bank.


How does a credit card billing cycle work?

Now we will take a closer look at how credit card billing cycles work. The billing cycle starts the day your card is activated. Then the balance on your credit card is usually zero although it might include any upfront fee that your credit card charges. If you are transferring your balance to a new credit card, it will also include balance transfer charges. Starting from that day, all the transactions on your credit card gets added to your credit card bill. If you make a cash withdrawal on your credit card, those charges are added as well. Then if you have EMIs running on your credit card, those are added too. Other finance charges related to your credit card will also get added. If any amount is paid back to your credit cards, such as a fuel surcharge waiver or a reversal of any payment made, it is subtracted from the bill and the final bill is generated. Any transaction that is made after the billing cycle is over reflects in the next statement. In the above example, if you make a transaction on the 6th of the month, it will only reflect in the next bill, and you will have more time to pay it.


What is the minimum payment?

The minimum payment on a credit card is the minimum amount you can pay on or before your credit card payment date to maintain your credit card account. It is only a small amount of your total outstanding amount. Making the minimum payment also helps you avoid late payment penalties on your credit card, which could be up to Rs 1,000. However, you should avoid making the minimum payment, if you really don’t need to. Once you make a minimum payment, the bank will keep levying interest on the remaining amount. This interest can be as high as Rs 48 per cent, and it eventually means that you will take several months to repay a single credit card bill.


What does payment due date mean?

The payment due date, as the name suggests is the date by which you need to pay your credit card outstanding every month. The payment due date is set 21-25 days since the last bill was generated. You can pay your credit card outstanding before the payment due date, but if you miss the date, late payment fees and other charges will be levied. In the above example, your payment due date could fall on the 24th of every month. If you pay your entire credit card outstanding by the payment due date, you do not incur any interest charges or penalty.



How do I know my credit card billing cycle?

Every month, you will get a billing statement from the bank issuing you a credit card. The billing cycle ranges from 25 to 31 days but can be shorter or longer depending on the type of credit card you own.

How does a credit card billing cycle work?

Your payment due date is about 21-25 days after your original billing cycle ends. You have the option of paying your bill in full or paying the minimum amount. In case you pay the minimum amount, the balance amount will be added to the following month's billing cycle with the added interest.

Can I change my billing cycle?

No. It is not possible to change the due date of payment, as billing cycles for credit card payment are determined by the bank that has issued you the card. While you can't change the due date, you can change the cycle by calling up the bank's customer care number.

Moneycontrol News
first published: Jul 19, 2019 09:11 am