In a credit card account, the next closing date is the date that marks the end of your current billing cycle. It is the day that the credit card company mails you your monthly statement and calculates the interest based on the balance. The interest will not be applied until after 21 days grace period if you don’t repay the full amount due.
As such, there is a credit card payment due date, which is the last day to pay the outstanding amount on your credit card, failure to which the interest and any other penalty are applied.
The two terms; credit card closing date and due dates are commonly confused. And, though they are related, they have mean different things and happen several weeks apart.
This article will compare and contrast the two and explain how each one affects your credit card scores.
Jump To A Section
- 1 When Does The Credit Card Closing Date Mean In A Credit Card Account?
- 2 Effect Of The Closing Date On Credit Scores
- 3 Determining The Next Closing Date On Your Credit Account
- 4 Credit Card Due Date Vs. Closing Date
- 5 Tips Of Credit Card Spending
- 6 Can I Use My Credit Card Between The Due Date And Closing Date?
- 7 Should I Pay My Credit Card On The Due Date Or Closing Date?
- 8 Is It OK To Pay Credit Card Before The Due Date?
- 9 Can I Change My Credit Card Closing Date?
- 10 Can I Use My Credit Card On The Day Of Closing?
- 11 Final Thought
When Does The Credit Card Closing Date Mean In A Credit Card Account?
The closing date is the end of your credit card billing cycle. You can find the exact closing date for your card and the length of the cycle on your recent statements. Any purchases after the date will apply to next month’s statement. After the closing date, you will be given 21 days grace period to pay off your card. If you manage to clear the outstanding balance, then interest will not be applied to your card.
You can use the grace period to reduce the interest due, which will be applied after. However, the balance on the closing date will be forwarded to credit bureaus which contribute to your overall credit scores.
Effect Of The Closing Date On Credit Scores
Every credit card has a limit that you can spend during every billing cycle. However, your credit scores will not be good if the used-up credit is more than 30% after the closing date. For instance, if your credit limit is $10,000 and you have spent $5,000 as of the closing date, it doesn’t look good, and this is the figure reported to the credit bureaus.
In such a case, you have a high percentage of card utilization, i.e., 50%, which is bad for your credit scores. Your credit utilization ratio (credit card balance divided by credit card limit) makes up 30% of the FICO ratings. Therefore, to be on the safe side, you should purpose to pay off any amount spent before the closing date or reduce it to at most 30%.
If you reduce your balance or pay it off in full, the credit card company will report a low or zero balance. Thus, there will be no reduction in your FICO ratings.
Determining The Next Closing Date On Your Credit Account
Though you can find your next closing date on your billing statement, some companies do not include it. You will have to calculate it from the number of days in your billing cycle and the last statement date. From your last statement date, count the number of billing cycles going forward. The day you get is your next closing date.
For example, if January 1 is your last statement date and the billing cycle is 28 days, your next closing date will be January 29.
Credit Card Due Date Vs. Closing Date
Unlike the credit card closing date that marks the end of your billing cycle, the credit card due date is the day you should make payment to avoid interest, late fees, and penalties from being applied to your account.
The payment through the mail should be made a few days before the due date to reflect on your account on time. You will pay the interest on late payment even if you delay for a day.
Always make an effort to reduce the balance on your statement before the due date to minimize the interest and avoid negative implications on your credit card score.
The closing date is at least 21 days to the payment due date as required by the law. This is the grace period given by credit card companies. If you make full payment before the 21 days lapses, no interest will be applied to your account.
Tips Of Credit Card Spending
1. Always Use Your Credit Card Immediately After The Closing Date
Using your credit card immediately after the closing date gives you enough time to pay it off and avoid any interest. Note that the interest is calculated on the closing date but applied on the due date if payment is not made in full. So, settling your account before the due date means you won’t owe your bank any interest.
2. Pay Off The Amount Spent On The Credit Card Before The Closing Date
Between the closing date and due date are 21 days grace period you can utilize to pay off your debt to avoid interest. However, the balance on your monthly statement affects your FICO rating. More than 30% credit card utilization is not good, and you should purpose to keep it low.
But, even if you spend to your limit but pay before the closing date, it won’t affect the credit score. The credit card company only reports the figure at the closing date, meaning the amount settled will not be reflected.
3. Use The 15/3 Credit Card Hack
This hack is where you make two payments monthly on your credit card balance instead of clearing it once. It works as follows:
Step 1: Check the credit card due date on your monthly statement.
Step 2: Pay half the amount due 15 days to the due date.
Step 3: Clear the balance 3 days to the due date
Using the 15/3 hack to avoid late payment gives you a better credit score. And, in turn, you will get better interest rates in personal loans and credit cards, plus pay low auto insurance premiums.
Can I Use My Credit Card Between The Due Date And Closing Date?
The time between the due date and closing date is commonly known as the grace period. You can use the credit card as long as you are within your card’s limit during the period. The amount you spend between the due date and the closing date will be reflected on the statement during the next closing date. And, therefore, will not attract interest in the upcoming due date.
If you have hit your credit card limit, repay the balance as per the last statement and start using it during the grace period to avoid any interest.
Should I Pay My Credit Card On The Due Date Or Closing Date?
Always purpose to pay off your card by the due date. As a result, you avoid the interest and any other penalty from being applied to your account. However, if you want to improve your FICO ratings, it is best to pay off the card before the closing date. When your statement is generated, you will have cleared the balance, or it is low. Therefore, the figure reported to the bureau does not raise any concern about your creditworthiness.
Is It OK To Pay Credit Card Before The Due Date?
It is OK to pay your credit card before the due date as it helps you free up your line of credit and avoid paying interest and late-time penalties. In fact, it would be best if you pay the credit card before the closing date to avoid any negative effect on your FICO scores.
Can I Change My Credit Card Closing Date?
Yes, you can change your credit card closing date, though indirectly. Since you are not the one who determines the lengths and dates of the billing cycle, most credit companies give you a chance to adjust your due date. Once the due date is adjusted, the billing cycle shifts too. You will be given several dates to choose from, and it is best to pick one that goes in line with your ideal cash flow. Note that most issuers don’t allow monthly change of due date, and when you adjust, it can take 1-2 payments before the same takes effect.
Can I Use My Credit Card On The Day Of Closing?
You can use your credit card anytime, including the day of closing, as long as you are within your credit card limit. If the statement has already been generated by the time you are using the card, the purchases will be reflected in your next billing cycle.
The credit card closing date is as important as the due date. The day marks the end of the current billing cycle and the start of another one. You can use the date to your advantage by always clearing or reducing the credit card balance to improve your FICO scores. However, if you cannot do so by the closing date, the credit card company generates and mails you the statement that day. You are then given at least 21 days grace period before the due date.
Making payment during the grace period helps avoid the interest and any late payment penalty. Again, it helps you free up your credit card account to allow for further spending.
Magalie D. is a Diploma holder in Public Administration & Management from McGill University of Canada. She shares management tips here in MGTBlog when she has nothing to do and gets some free time after working in a multinational company at Toronto.