What is a credit card billing cycle?
A credit card billing cycle is the duration between the monthly billings. The cycle should start from the last payment of the bill until the next time when you need to pay for the same bills, which is usually within a month. For instance, if you make credit card billing on the first day of the month and you are required to do it again at the start of the next month, then you can describe that period as your credit card billing cycle.
How long does a credit card cycle last?
A credit card billing cycle can often range from 28 days to 31 days based on the month of the year and the agreement you have with the credit card service provider. The cycle for a new credit card account will start the first day of billing with zero balance and will continue to increase as you continue to bill using it. Some accounts have upfront fees, implying that they would start with a precise balance. This is to say that your account will be credited as you make purchases depending on the type of account you have linked to your credit card.
How to use credit card billing cycle smartly
Do you have a credit card that you use for your billings? If yes, you need to understand how credit cards work and ensure you reap maximum benefits from them. Here are some smart ways of optimizing your credit card billing cycle:
Ensure that you pay off your cards
Although this might seem obvious, it will help you avoid burgeoning debts. In fact, only a few people pay off their credit cards every month, which explains how most people continue increasing their liabilities. One way to ensure you use your credit card billing smartly is to ensure you pay off your debt whenever possible.
Consider paying more than the minimum
Whenever you can, always consider paying more than the minimum set every month. If you only focus on spending on the debt, you will end up losing a lot of money to debt, and it is imperative to change this. If you pay more than you are required, you will be able to pay off your credit card debt in time, and this will reduce the interest you will pay in the long run. Make sure you always contribute more even if it is by as little as $10.
Many people are always tempted to spend on the credit card up to the set limit. Although this can have a positive impact on your credit history and score, running it too high can negatively affect you financially. Most financial institutions such as banks, Sacco, and mortgages will consider your available credit and the amount you have used to rank the risk you pose to them. You can use the credit card billing cycle smartly by ensuring that you keep your credit balance as low as possible by adhering to a good credit card utilization ratio.
Avoid cash advances
If you want to use credit card billing smartly, you must ensure that you avoid cash advances at all means. Although many people are often eager to take cash advances using their credit cards, it is a wrong financial decision because it requires you to pay interests and fees. Interests and fees on credit card cash advances can increase your liability by increasing your debt. As such, only take credit card advances to cover emergencies because this is a prudent way of using your credit card billing cycle smartly.
Always pay on time
The unwritten rule of smart credit card billing is ‘pay on time.’ If you want to limit the interests and fees charged on your credit card, always pay your debts as soon as possible. This will also help you to improve your credit score and save a significant amount in the long run. Paying bills on time will also ensure that you do not pay extra cash in the form of penalties.
Let your accounts remain open
If you have paid off your credit card, keep it open because closing it can harm your credit score. Closing your account will lower the total credit available to you, and this can affect your credit score negatively since it is a standard in credit score calculation. Always note that the more credit you can access with your account, the more appealing you are to your creditors.
Monitor your account
Online purchasing is prone to fraudsters. If you usually make online payments, always monitor your credit card transactions. Make it a habit to review your account by checking your balance and skimming through the operations to detect any suspicious transaction. It is a smart move because it will ensure that you are not helping people you don’t know to pay their bills using your credit card. Moreover, it will help you cancel any automatic billing for services you no longer use.