For the first-time credit card users, the concept of a billing cycle may seem little confusing. The billing cycle might vary for each of your cards. But the basic calculation followed is similar for most of the banks. Let’s try to understand various factors involved in billing cycle.
The billing cycle, also called statement cycle, is the period for which the bill is generated. All the transactions conducted during the period will reflect in the credit card statement of the month.
For instance, if the billing date or the statement date of your card is 3rd of every month, your billing cycle would be typically from 4th of previous month to 3rd of the current month. All purchases, cash withdrawals, payments, etc., made during the period will reflect in the statement generated at the end of the billing cycle.
Let’s consider an example of a credit card statement generated on 6th March. It constitutes the transactions conducted between 5th of February to 6th of March. Any transactions conducted after the statement date, 6th March in this case, would be considered in the next month’s billing statement.
The billing date or statement date is the date on which the statement is generated every month. It typically is the last day of the billing cycle for a given month.
Any transaction conducted on the card post the billing date will reflect in your next billing statement.
In the above example, 6th March is the billing date for the billing period between 5th February and 6th March. Any activity after 6th March will reflect in the billing statement generated in April.
In the simplest of terms, minimum due or minimum payment is the least sum of money that you must pay every month towards our outstanding bill on the credit card. Negative points or late fee charges will not be triggered if you keep making the minimum due payments towards the credit card balance.
Once you receive your billing statement, you will notice payment due date, on or before which you need to clear your outstanding dues to avoid penalties.
The payment due date is typically 21-25 days after the statement date or post the billing cycle ends. The period between the billing date and the payment due date is the interest-free credit period or the grace period offered by your card issuer. The due date hence depends on the interest-free credit period offered by the credit card.
For instance, HDFC Bank offers interest-free credit period of 20 to 50 days. So, for a HDFC credit card with a grace period of up to 50 days, if the statement date is 5th of every month, the payment due date would be 25th of the same month.
Thus, a transaction conducted in the beginning of the billing cycle will have more grace period, compared to the one which is done at the end of the billing cycle.
However, grace period is not applicable if you have any pending dues from the previous month.
If you cannot afford to pay the total outstanding on your card for any given month, there is an option to pay a small portion of the due to avoid late payment fee.
The small portion of amount, technically termed as Minimum Amount Due (MAD), is decided by your credit card issuer. You will find MAD for the month in your credit card statement.
Minimum amount due is typically 5% of the total outstanding on your credit card or a fixed amount of Rs.200 to Rs.300, depending on your card policy.
In case, you have any loans on your card, the instalment pertaining to the month will be added to the minimum amount due. In that case, MAD becomes 5% of the outstanding + EMI/s + taxes, if any. Any over limit amount on the card will also be added to the MAD along with unpaid MAD from the previous month/s.
The billing cycle may not directly impact your credit score, however, missed payments, partial payments, paying only minimum amount due, etc., would significantly impact your credit score.
According to CIBIL, a missed payment can affect your credit score for as long as two years and it reflects on your credit report for up to 36 months. As the card issuers report your credit card account related data every 30-45 days to credit rating agencies, a single missed payment, either intentional or by mistake, would take a toll on your credit score.
You can find your billing date, payment due date, minimum amount due and all other information related to your account in the statement generated every month.
Depending upon your card issuer, you would either receive your statement physically to your registered mailing address or as an e-statement sent to your registered e-mail ID.
Alternatively, you can also visit your credit card net banking account to access your recent statements.
Changing billing cycle or billing date on customer request policy may not be the same for all the credit card issuers. You can call your respective card provider and check for the availability of the option.
You can check your card’s most important terms and conditions document to know the grace period on your card.
Alternatively, you can also contact the respective credit card customer service helpline to enquire the same.
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