What Is Credit Card Billing Cycle? How It Works, Minimum Payment And Due Date

The billing cycle denotes the duration during which your credit card statement is generated.  All transactions conducted within the billing cycle will be detailed in your subsequent statement.

When acquiring a credit card, it's crucial to educate yourself on the various terms and conditions associated with it, including the credit card billing cycle. Grasping the intricacies of your credit card's billing cycle holds significance for effective financial management. Once you familiarise yourself with your credit card billing cycle, you can optimise your card usage to your advantage. The billing cycle denotes the duration during which your credit card statement is generated. 

All transactions conducted within the billing cycle will be detailed in your subsequent statement.

Billing Cycle Of The Credit Card:

The billing cycle, also known as the statement cycle, includes the duration for which the credit card bill is issued. All transactions conducted within this timeframe are documented in the credit card statement for the respective month. For instance, if your card's billing or statement date falls on the 3rd of each month, the billing cycle typically spans from the 4th of the preceding month to the 3rd of the current month. All purchases, cash withdrawals, payments, etc., made during this period are captured in the statement generated after the billing cycle.

Consider a credit card statement generated on March 20th. It will include transactions conducted from February 19th to March 20th. Any transactions carried out after the statement date, which is March 20th in this scenario, will be reflected in the subsequent month's billing statement.

How Does The Billing Cycle Work:

The billing cycle commences from the activation date of your card. Initially, your credit card balance is typically zero, except for any upfront fees or balance transfer charges if applicable. From this initiation date, all transactions on your credit card are recorded and accumulate towards your bill. This includes purchases, cash withdrawals, ongoing EMIs, and any other associated finance charges. If there are any repayments or adjustments, such as fuel surcharge waivers or payment reversals, they are deducted from the total bill, resulting in the final bill amount. 

Any transactions conducted after the billing cycle ends are reflected in the subsequent statement. For example, if a transaction occurs on the 6th of the month while your statement is till the 5th, it will be captured in the next billing cycle, providing you additional time for payment.

How Does Minimum Payment Work:

The minimum payment on a credit card represents the smallest amount required to maintain your credit card account, typically due on or before the payment date. It constitutes only a fraction of your total outstanding balance. While making the minimum payment aids in avoiding late payment penalties, which can be as high as Rs 1,000, it is advisable to avoid it if possible. 

Opting for the minimum payment results in an increase of interest on the remaining balance, often at rates as steep as 48 per cent. Consequently, this practice prolongs the repayment period, potentially extending over several months for a single credit card bill.

How Due Date Work:

The payment due date is the deadline for settling your credit card's outstanding balance each month. Typically set 21-25 days after the last bill was generated, this date signifies the timeframe within which you must make your payment. While it's possible to clear your credit card balance before the due date, missing this deadline incurs late payment fees and additional charges.