Credit Card Billing Cycle: What It Is & How It Works

Ever wondered why your credit card bill is generated on specific date only, or how credit card issuers/bank decide your due date? This falls under billing cycle, an essential but often overlooked part of credit card management. Understanding it can help you avoid interest, late fees, and even make smarter spending decisions.

 

What You’ll Learn in this Blog

• What is a credit card billing cycle?
• How to find your statement and due date
• Tips to avoid interest and late payment fees
• Smart usage practices for BOBCARD users

 

What is Credit Card Billing Cycle?

A credit card billing cycle refers to the period between two consecutive credit card billing statements. It determines when your credit card payment is due and directly affects how interest is calculated.

Understanding your credit card billing cycle empowers you to make timely payments, avoid late fees, and take advantage of the interest-free grace period. This blog elaborates further on the essential elements of your billing cycle.

Credit Card Statement Date or Billing Date

The starting point of the credit card billing cycle is termed as the statement date or billing date. On this predetermined date every month, your credit card issuer generates a statement listing all the transactions, charges, and any interest or fees accrued during the cycle.

The billing statement provides a consolidated summary of all debits and credits in the billing period, along with outstanding dues, if any. It acts as an invoice for users to review charges and make payments against it.

For example, if your billing date is the 10th of every month, your cycle runs from the 11th of the previous month to the 10th of the current month. A statement is generated on the 10th, and your payment due date is generally 20 days after that.

The statement date varies across financial institutions and even different credit card variants. Customers can find the credit card billing cycle and due date printed on their monthly statements for reference.

Like, BOBCARDs are currently being issued for the billing cycles of 1st , 7th, 13th, 16th, 18th or 25th of every month, as per BOBCARD discretion.

 

Understanding the Grace Period: Your Interest-Free Window

The grace period is the time between your statement date and the payment due date. If you pay your full balance during this time, you won’t be charged any interest on new purchases.
Grace periods typically range from 20 to 50 days, depending on your card issuer. This duration is also mentioned clearly in each month's billing statement. For BOBCARD holders, this grace period is upto 50 days. 

Calculating the Payment Due Date for Credit Cards

The payment due date is the last date by which the credit card outstanding needs to be paid to avoid late payment penalties or interest charges. Financial institutions offer grace periods to give you time to settle your dues.
Customers should ensure they pay at least the minimum amount due mentioned in the billing statement by the due date every month. Some ways the payment due date is determined:

• Fixed Due Date: Some credit cards fix a particular date every month as the payment deadline e.g, 21st of each month
• Payment Period: Certain financial institutions provide a defined payment period. For instance, payment is to be made within 25 days of the statement generation date.

The best practice is to set payment reminders for the billing due date and pay on time. Even if the billed amount cannot be paid fully, ensure to pay the minimum amount due before the due date. This will prevent rollover of the outstanding amount to the next credit card billing cycle and due date, along with added interest costs.

Missing payment deadlines can attract penalties ranging from ₹100 to ₹1000, depending on the card issuer's terms. It also negatively impacts credit rating, making future credit expensive.

What is the Minimum Amount Due on a Credit Card?

The minimum due amount is the lowest payment that customers need to make against their credit card statements to keep their card status active.

Financial institutions compute the minimum due amount based on different parameters. This forms a certain percentage of the total outstanding amount. It can range between 5% to 20% across different credit cards.

For instance:

• Total outstanding amount on credit card - ₹5000
• Minimum due amount - 5% of ₹5000 = ₹250

Even if customers cannot pay the complete bill amount, they should at least pay the minimum due amount so the credit card does not get blocked or default. Any unpaid amount gets carried forward, attracting interest charges.

Experts, however, advise not to treat the minimum due amount as the target. Wherever possible, pay the full billed amount within the due date. This helps:

• Avoid getting into debt traps by rolling over outstanding
• Reduce overall interest costs on the credit card
• Improve creditworthiness for future transactions

Credit Card Usage Tips

Here are some tips to ensure responsible usage of credit cards, leveraging credit card billing cycle and due date aspects:

Pay outstanding fully whenever possible

Customers should try to pay the entire bill amount instead of just the minimum due every month. This minimises interest costs and long-term debt.

Avoid cash withdrawals

Cash withdrawals made through credit cards can be expensive. Other than fees, they accrue interest charges right away, unlike normal purchases. Avoid them unless there is an emergency requirement for cash.

Setup payment reminders

Configure email and SMS payment reminders around 7-10 days before the payment due date. This prevents any chance of missing the payment deadline and reduces late penalties.

Restrict usage if closing outstanding is difficult

If customers are finding it difficult to pay their credit card bills on time for months, limit card usage to essential expenditures only. Using credit cards excessively when historical bills are unpaid makes debt positions worse.

Review statements diligently

Spend time every month to evaluate billing statements for any discrepancies in charges or unpaid amounts rolled over from previous cycles. It gives visibility on outstanding debts and expected payment timelines.

Inform bank for changes in contact information

Timely intimation regarding a change in contact details ensures customers continue receiving billing statements and payment reminders regularly. Disrupted communication can lead to missed payment deadlines.

Conclusion

Your credit card billing cycle is more than just a date, it’s your guide to smarter credit use. Knowing when your statement is generated, understanding your grace period, and staying mindful of due dates can help you manage your credit card more efficiently.

BOBCARD users can take full advantage of these tips using the intuitive BOBCARD app, which offers real-time tracking of billing cycles, due dates, and payment alerts.

Want to make the most of your credit card? 
Explore the full range of BOBCARDs - whether it's shopping, travel perks, or premium rewards, there’s one to match your lifestyle. Visit: https://www.bobcard.co.in/credit-card-types