Credit card companies use repeating billing cycles to calculate interest owed and bills due. Knowing your credit card billing cycle puts you in the driver’s seat, knowing when to expect your monthly bill or statement.
Billing Cycle Definition
Credit card companies define billing periods or cycles to figure out how to issue bills and charge interest. The billing cycle has a specific number of days with a closing date that ends the billing cycle. After the closing date of one billing cycle, the next one begins. Credit card companies use the beginning and closing dates of a billing cycle to calculate interest on a balance.
Determining Billing Cycles
Call your credit card's customer service number to find out the length and dates of the billing cycles. By knowing the closing date of a billing cycle, you might be able to time a credit card purchase to happen just after one billing cycle ends and the next one begins. This can be an effective way to “float” a purchase and give yourself extra time to pay the bill, because that purchase won’t show up on the bill about to arrive – it will show up on the next bill.
Federal Regulations for Billing Cycles
The federal government regulates credit card companies closely to make sure they don’t take advantage of consumers. Some billing requirements include a static due date that doesn’t change from month to month. You should also have a minimum of 21 days between getting that bill in the mail and the payment coming due. Credit card companies are also prohibited from making a cut-off time before 5 p.m. When your due date falls on a weekend or holiday, the credit card company has to push it forward to the next business day. Gone are the days when a credit card company can use both the current balance and daily balances from the most recent billing period – even if you paid some of your balance -- to calculate interest due: In 2010, the federal government banned two-cycle billing to protect consumers.
Potential Interest Trap
Although credit card companies can’t legally use two-cycle billing cycles anymore to figure interest, some have figured out ways around this new regulation. The SmartMoney website warns that credit cards without a grace period for interest accrual start charging you interest on the day you make a purchase. If you start the cycle without a balance carried forward, make a purchase, and then make only a partial payment at the end of the billing cycle, the credit card company will keep the difference in interest due back to you from the partial payment.
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