Credit cards are rapidly becoming one of the most popular methods of payment, and are being taken up by millions across the country for their range of excellent benefits. With credit cards becoming prevalent, it is important to discuss the nitty-gritties of a credit card, so that people fully understand what they are getting into.
One of the most important aspects of a credit card is its billing cycle. Knowing what a billing cycle is, and how it works can be essential to help people not only save a considerable amount of money but can also help them maintain a good credit profile. Let us understand what a billing cycle is, and how it works.
What is a credit card billing cycle?
To phrase it within a few words, a credit card billing cycle is defined as the time period between two consecutive billing statements. It usually lasts anytime between 28 to 31 days, that is, around a month. But because different months have a separate number of days, there are measures taken by financial bureaus to ensure that the billing cycle for every month is equal.
To ensure this, guidelines have been put in place so that the current statement closing date isn’t four days before or after the previous statement closing date. The exact period is decided by the bank or credit card company, sticking to such guidelines.
How do credit card billing cycles work?
Now that we know what billing cycles are, the big question is, how do credit card billing cycles work? To understand this better, let’s take a simple example. Say your credit card was activated on the 3rd of January, 2021 and the billing cycle ends on the 2nd of February, 2021.
During this entire period of time, all the transactions you’ve done using your credit card will show up in your monthly credit card statement.
The credit card statement is generated on the last day of the billing cycle, and is known as the statement or billing date. Therefore, from now on, all your billing cycles will last for 31 days, and the next billing cycle will always begin from the very next day after your previous billing cycle ends.
Generally, 21 to 25 days after your billing cycle ends is your payment due date, when you have to pay back all the money that you borrowed from the bank. This includes all the purchases you made using your credit card, all the EMIs of loans taken against your cash limit, and all the extra charges for things like cash withdrawal from ATMs.
The payment due date is usually a few days after the end of your billing cycle to help you gather the finances required to pay back the money. If you pay back the dues on time, you can enjoy the bank’s funds free of cost without paying additional charges. But if you fail to pay within the due date, then there are other scenarios that arise.
On failing to pay within the due date, most banks offer a grace period, wherein you are offered a few extra days to pay back the amount. However, if you fail to do that too, then comes in the concept of Annual Percentage Rate or APR. Annual Percentage Rate or APR is an interest charged for extending your credit period.
This is charged when you either pay only the minimum amount due (which is only a percentage of the total amount that you need to pay to keep the credit card going), or pay only a portion of the outstanding amount. In such a case, the amount that you owe is carried over to the next billing period with an add-on interest -- the annual percentage rate.
Therefore, it is evident that one needs to know enough about their credit card billing cycle. Nowadays, the system is even simplified and online. You can know about your RBL Bank credit card billing cycle by downloading the SuperCard’s statement on the RBL MyCard app.