If you’re paying off your credit card bills before their due dates, or making more payments each month, it could improve your credit score faster.
One of the first things that you should do when you get a new credit card is to note the billing date and due date.
The billing date is the date your credit card issuer will send out your credit card statement every month. The due date is the last day to pay your credit card bill to avoid accruing interest charges.
These dates are important for avoiding late fees, penalties and interest charges. They can also help you get a better handle on your credit.
1. Credit card billing cycle:
The credit card billing cycle is the period of time during which purchases and charges are attributed to a single monthly bill. It is the time between the last statement closing date and the next one. The period typically ranges from 28 to 31 days depending on the credit card issuer.
2. Credit card statement closing date:
The credit card statement closing date is the date when the credit card statement is generated. It’s the date when all of the transactions made between the last statement and current statement closing date will be included on your next billing statement.
After receiving your credit card statement, you’ll have a grace period, where you can pay the balance in full without incurring interest charges, as long as you make the payment in full before the due date.
3. Credit card payment due date:
A credit card payment due date is the last day to make a minimum payment on your credit card to avoid penalties and late fees. If you don’t pay off the full amount before this date, you’ll be charged interest.
Your payment due date has a huge impact on your credit score. It’s a significant factor in your score (35%). Paying off the bill after it’s due could cause real damage to your score.
4. Annual fees due dates:
If you have a credit card that comes with an annual fee, you’ll need to pay it once a year. These fees can vary widely and are sometimes based on the perks you receive, like travel discounts, rewards and cash back.
Not all cards with an annual fee offer lower rates or even bonuses. So when applying for a new card, look closely. Compare APRs, fees and the perks you’re offered.
If an account is past due, this means that the minimum required payment was not paid as of the last payment due date. After a missed payment, your credit card account will become “past due.”
If your payments are past due, you can expect to be charged a late fee, in addition to the interest charged on the balance you’re carrying over. If you continue to miss paying your due date, you could face increased interest rates or even lose the ability to make purchases.
Even if you missed a due date, it usually won’t affect your credit rating until the payment has been 30 days late, depending on when your card issuer reports to credit bureaus.
If you’re more than 180 days or six months late on your credit card bill, your account will probably be closed. You’ll have the option to pay it in full, and you won’t have the option to make minimum payments. Your credit card company may also sell or assign the account to a collection agency.
Charge-offs are one of the worst things that can happen to a person’s credit report. When you apply for another credit card, you’ll have a tough time qualifying and may be denied.
You can address a “past due” status on your credit report by making future payments on time as well as paying off any interest charges and late fees that have accumulated.
After making your next payment, your credit card issuer will report your on-time status to credit bureaus. If your issuer raises your APR because of a past-due payment, you’ll usually return to the regular rate after six months of on-time payments.
If you can’t afford to make a minimum payment on time, talk to your credit card company about payment options. They may be able to offer a different arrangement.
Some lenders may transfer past due amounts to the balance of your credit line, helping you come out of a past due status on your credit report.
Always note the billing date and due date on your credit cards to avoid late fees and interest charges. Note the annual fee due date too, and if you make a late payment, try to stay on track with future payments or work with credit card issuer.
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With a postgraduate degree in commerce from The University of Sydney, Pranay has his finger on the pulse of the finance industry. Breaking down complex financial concepts is his forte.