Whether through a credit card or a monthly household bill, all products and services have a time period for which they are billed. Understanding your billing cycle will help you budget your money better. A general knowledge of your cycle can also help you understand when charges will incur and when payments will be due.
Definition of Billing Cycle
A billing cycle is the time period between bills. For services, like a home's cable, phone or water bill, the billing cycle is the interval of time that you use the service until the next bill is generated. For bills on products, like a credit card bill, the billing cycle is the interval of time that the products you buy will show up on your next bill. For instance, if your billing cycle is from the 15th of one month to the 14th of the next, then your bill will show what you have purchased between those dates. In this case, the billing cycle is 30 to 31 days long.
The grace period for a service-related bill occurs when the bill is due, but additional time is given before a fee or late charge is assessed. For credit cards, grace periods can also refer to the amount of time that interest and fees are not added to your total amount.
Credit Card Billing Cycle Types
Credit card billing cycles come in a few different types. Single-cycle billing and two-cycle billing are the most common. In a single cycle, you are not charged any fees if you are able to pay off the charges in full by the next due date for your credit card. In a two-cycle situation, the charges are accrued on purchases over a two-month period. You can avoid additional charges by paying in full two months in a row.
The federal government has mandated that bills from credit cards must be available at least 21 days before your payment is due. This is to give you enough time to pay without accruing charges. If your due date falls on a weekend, the company is required to give you until the next business day before penalizing you in any way. Your bill due date must also be the same every month.