When you start using a credit card, you get introduced to several new terms. The credit card billing cycle is one such term. Understanding this term is a factor in managing and planning your finances. Getting familiar with it will help you use your credit card easily. The billing cycle is the period for which your credit card bill gets generated. It will include all the payments and transactions you make in that period.
Let us look at it in more depth.
Credit Card Billing Cycle, a Definition
Let us understand the concept of a credit card billing cycle through an example. Suppose your credit card bill gets generated on the 4th of every month. It means your credit bill billing cycle is from the 3rd of the previous month to the 4th of the current month. All the transactions you make using your credit card will be reflected in the billing cycle. It will include online payments, EMI payments, cash withdrawals, etc.
What will I find in a credit card billing cycle?
Your credit card billing cycle will start the day you acquire your credit card. It will include everything you do in the billing period through your card. Some of the features of a credit card billing cycle include the following:
- The billing period will start on the day your card is activated.
- The balance on the card might be zero, but it will have other charges, like a joining fee.
- Every transaction through the card gets added to your credit bill.
- You will get a billing statement at the end of every billing cycle.
- Apart from the transactions, this statement will also include any amount added to your card as credit.
- It includes reimbursements, payment reversal, cashback, charge waivers, etc.
Credit Card Bill Payment
Depending on your bank, your credit card billing cycle will range between 27 to 31 days. After you get the statement of your transactions at the end of this period, you will be required to pay the bill. A bank will give you 15-20 days by when you have to pay your credit bill. You can either pay the entire bill or the minimum amount due for that month.
Minimum Amount Due
The minimum amount due is the minimum sum of amount that you have to pay every month for the pay online credit card payment of your credit card bill. It is to give you more flexibility on your finances. If you cannot pay your credit bill for a month, you can avail of the option of the minimum amount due. By paying the minimum amount due within the period of your billing cycle, you can avoid late fee charges.
The minimum due value is around 5% of your overall credit bill. For example, if your credit bill for the month is ₹30,000, then your minimum amount due for that month will be 1500. The rest of your credit bill gets added to your next billing cycle, and you will have to pay finance charges.
What are Finance Charges?
A finance charge can be defined as the interest rate charged on the outstanding balance from the previous cycle of your credit bill. It is applicable when you have not paid your previous bills in their entirety or have only paid the minimum amount due. If you pay them entirely on time, there are no finance charges on your bills. It is good to pay your bills within the grace period to avoid any extra charges from your bank.
What is a grace period?
Your bank gives a grace period after generating your credit card bill. You have to pay your bill within this period to avoid any late charges from the bank. A bank usually gives you 15-20 days to pay the amount after your credit card bill generation. It is ample time to pay your bills if you are financially disciplined.
Credit Report and Credit Score
The credit report is given to the credit bureau by your respective bank every month. It is sent at the end of the credit card billing cycle. This report will include statistics like monthly payments, credit limits, payment history, missed payments, defaults, etc. It will also include the amount of money you owe at the end of the grace period. Ideally, this value should be zero, as you should pay your credit card bill by this period.
This credit report holds a lot of value. It is regarded as a consolidated memo of your financial habits and discipline. Ensuring you have a clean report every month will help you maintain a good credit cibil score. And a good credit score is like gold dust in today’s time. It helps you enjoy the best benefits of discounts and offers and allows you to take good loan amounts at lower interest rates.