Billing cycle

Billing cycle is a money term you need to understand. Here’s what it means.

What is a billing cycle?

A billing cycle refers to the number of days between the last statement date and the current statement date. Billing cycles vary depending on the creditor or service provider, but typically last between 20 and 45 days.

Deeper definition

The billing cycle is the time frame between billings for an account. The company may opt to determine a billing cycle by a certain number of days or on a certain date.

Additionally, some companies choose to start the billing cycle on the day the account is opened, while others choose to start the billing cycle for all accounts on the same day. In the latter instance, the company will prorate the bill for the amount of time before the start of the next billing cycle.

The time between the end of the billing cycle and the due date is known as the grace period. If the account holder does not pay the balance or amount due, the account is subject to penalties.

Billing cycle example

After purchasing a new mobile phone you must pay an agreed-upon amount every month to establish and keep service. A cellphone provider may start billing for service on the fifth of the month and then bill again on the fifth of every month thereafter.

When looking at the monthly statement, you will see a listing of all of the charges for that month. The bill also will include a due date for payment, which will likely be on the same day of each month. If charges are not paid in full by this due date, they are added to the next billing cycle along with any applicable late fees or interest charges.

Do you have a credit card? See how understanding and working with your billing cycle can help you save on your credit card bill.

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