Billing Cycle of Credit Card

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.

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.

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.

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.