If you use a credit card, you must be familiar with the term called billing cycle. As the name suggests, billing cycle refers to the period for which your credit card bill is generated. Understanding billing cycle is important for your financial planning. It will help you to save significantly in interest charges and late fees.
Once a credit card is issued, the billing cycle usually remains fixed till you cancel the card. However, the Reserve Bank of India (RBI) has now allowed the customers to change their credit card billing cycles once, starting from this month. As the card-issuers do not follow a standard billing cycle for all the credit cards, the regulator has permitted the users to choose their own billing periods.
Understanding Billing Cycle
A billing cycle is the length of period between the last closing statement and the next. Let us take an example to understand what it means
If your credit card statement is generated on the 18th of every month, the billing cycle will start from 19th of the previous month and continue till 19th of the current month. All transactions including balance transfer, cash withdrawals made during a billing cycle, will reflect in your monthly credit card statement or bill. Any transaction that is done after the billing cycle, will come in the next credit card statement. For example, if you do make credit card transaction on 20th of the month, it will show up in the next bill.
A billing cycle may vary from 28 to 31 days, depending on your bank or credit card issuer.
What RBI Says About you Credit Card Billing Cycle
Earlier, there were no rules to modify credit card billing cycles. Banks used to allow the customers to change their credit card billing cycles, depending on their internal policies.
The Reserve Bank of India has recently said, “Card-issuers do not follow a standard billing cycle for all credit cards issued. In order to provide flexibility in this regard, cardholders shall be provided a one-time option to modify the billing cycle of the credit card as per their convenience.” This new rule has been effective from July 1, 2022. So, now customers have an option to change their billing cycle.
How will this New Rule Help you?
Modification of credit card billing cycle will help the users in more ways than one. “Allowance of the one-time option to modify credit card billing cycle is a great initiative towards helping card holders manage their finances efficiently,” mentioned Pranjal Kamra, chief executive officer, Finology Ventures.
This new rule will be extremely beneficial for those who use multiple credit cards. “For the customers, it becomes simple as they do not have to separately remember of dates for their repayments of the multiple credit card bills separately. They can bring everything at a certain date. This will allow them to plan there repayments better,” Sujay Das, chief risk officer, Freo.
“Salaried individuals, especially those having multiple credit cards should opt for this option to streamline their finances,” Kamra said.
Answering to how to choose your billing cycle, Kamra explained,”Ideally, the billing date should be on or just after your payday of the month, to ensure that you are able to meet your credit card bill without hassle.”
“In addition, it allows the user to take maximum benefit of the 45-51 days interest-free credit period available,” he further mentioned.