Credit Card Account Statement Closing Date: What Does it Mean and How Does it Affect You?

buying online with a credit card
Man with a credit card | Source: iStock

If you’re trying to maintain or improve your credit score, it’s important to understand basic terms. One item you might notice on your credit card statement is the closing date. But what is it and how does it affect you?

Credit card statement date meaning

Credit card transactions are billed at set times called billing cycles. The last day of the billing cycle is the account statement closing date. You have a grace period between the statement closing date and the payment due date that’s roughly between 21 and 25 days, depending on the card you have. If your card has a grace period, the credit card company is legally required to offer a grace period of at least 21 days from when you get your statement for you to make a payment before interest is charged on new purchases.

Why the closing date is important

The closing date is when the creditor calculates the finance charges and adds them to the balance. The credit card company also prepares your bill on this date. Know that your balance on the statement closing date is the balance that will be reported to the credit bureaus. So, each account statement includes every charge from the last closing date until the current closing date.

Credit card closing date vs. due date

The due date and statement closing date are not the same. Your due date is when the payment is due on your statement balance. This date is when payment is due for charges made from the previous billing cycle. The closing date, as stated earlier, is the last day of the billing cycle and the point at which finances charges are calculated and added.

How to take advantage of the billing cycle

If you’re planning to make a large payment so you can pay down your balance or to pay it off completely, your best bet is to do it before the account statement closing date. This way, the lowest balance is reported to the credit bureaus. Consequently, your credit reports will show you’re utilizing less of your available credit. Credit utilization accounts for 30% of your total FICO score, so it’s important to keep balances as low as possible. Furthermore, if you want to avoid interest charges, you’ll need to pay off your statement balance in full before the statement closing date.

Improving your credit

It’s not only important to understand basic credit card terms but also the basics of credit card management. Make sure to pay your bills in full and on time each month. Also, try not to charge more than you can pay off at the end of the billing cycle. If you find yourself charging more than you can pay off within a reasonable amount of time, it might be time to reevaluate your spending habits and develop a monthly budget. With time and a bit of self-control, you can achieve or maintain a great credit score.

Sheiresa Ngo is a certified credit counselor.

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