Opening a credit card comes with the need to learn some new terms. Among these is your closing date. The closing date is commonly confused with the payment due date. Discover what the closing date is and why it matters.
Your credit card closing date is the final day of your billing cycle. After this, your new billing cycle will start, and you will see the amount you charged on the previous cycle, which will be due on the payment due date. For most credit cards, you will have about 20 to 25 days between your closing date and the due date for that cycle's payment.
Take a closer look at the closing date on your credit card and what it means. Learn why it matters as well as how it is different from the payment due date.
Credit Card Closing Date – Your Complete Guide
The credit card closing date should not be a hard concept to grasp. Even so, it is very important to understand, as it helps you plan your monthly finances. We will cover all of the information you need to know about the closing date.
What Is The Closing Date On A Credit Card?
To keep things simple, the closing date is the last day of a billing cycle on your credit card. You don't have to do anything special on that date, but you should know what it is, as it is a crucial part of the billing cycle.
Your Finance Charges Are Calculated on the Closing Date
Perhaps the most important thing to know about your credit card closing date is that this is when your finance charges for that billing cycle get calculated. It is on this date that those finance charges get added to your credit card balance.
The Closing Date Is When the Credit Card Issuer Prepares the Billing Statement
In addition to calculating your finance charges and adding them to your balance, the closing date is also when your credit card issuer prepares your billing statement. That statement includes all of the transactions from that billing cycle. This means every transaction between the previous statement's closing date and the current closing date.
The Statement Balance and Current Credit Card Balance May Be Different by the Time You Pay
Keep in mind that your payment due date will be several weeks after your closing date. As such, if you make purchases after the account statement closes, you may find yourself having a different current credit card balance by the time your payment is due. This will be the case if you make additional purchases or payments. You don't have to pay off your full credit card balance on the payment due date. You just need to pay off the balance as of the closing date. You can find this on your credit card statement, where it is listed as the payment due.
As an example, assume your statement closes with a payment due of $100. The next day, you spend $50 and don't put anything else on your card before your payment due date. You would still only owe $100 on that cycle's payment due date. The $50 would be in the next cycle's statement.
How Can You Find Your Closing Date?
Interestingly, your credit card statement will not necessarily list the closing date or the upcoming closing date. If you want to try to pay your balance before your closing date, this can pose a challenge.
Luckily, you can easily calculate your closing date. All you have to do is look at your last two statements. You can see your previous statement's closing date by looking at the statement itself. That same statement will also tell you how long your billing cycle is. If you want to confirm your calculations, get the same information from the previous statement as well. They should have the same cycle length.
Then, all you have to do is add the number of days of your billing cycle to the previous closing date.
Closing Date Vs. Payment Due Date
One common point of confusion for many people is the difference between the closing date and the payment due date. The simple difference is:
- The closing date is when your billing cycle ends, and the statement balance you owe is calculated.
- The payment due date is the day by which you have to pay your statement balance to avoid interest or potential late fees.
Additionally, the payment date for a cycle will be about 20 to 25 days after the closing date.
Why Is My Closing Date After My Due Date?
If you look at your credit card dates and notice your closing date is after your due date, this may lead to questions. After all, your payment due date is supposed to be about 21 days after the closing date.
The answer is simple: These dates are for different billing cycles. The payment due date is from your last billing cycle, while the closing date is for the next one.
As an example, assume your closing date is the 1st of every month, and your payment due date is the 22nd of every month. In this case, the March 1st closing date and March 22nd payment date would be for the same billing cycle. If you look and see a payment due date on March 22nd and a closing date on April 1st, the closing date is after because it is for the next cycle.
You Can Probably Change Your Payment Due Date
If you prefer, your credit card issuer will likely let you change your payment due date. This date will always fall on the same date of the month, but you can frequently adjust it, so it is on your preferred date.
This can make it easier for you to budget and ensure that you always pay your credit card bill on time. For example, you could set the payment due date for a week or so after you get paid.
Should I Pay Off My Credit Card Before the Closing Date?
You can pay off your credit card before your closing date, but there is absolutely no need to do so. You should always aim to pay it off by the payment due date. Doing so will prevent you from accumulating interest.
Why Not to Pay Off the Balance Before the Closing Date
There is actually one very good reason to not pay off your credit card before the closing date. That is the fact that the financial charges aren't calculated until the closing date. If you want to pay before the closing date, you would have to calculate the amount due yourself. Even if you can check your balance due in real-time, this amount may change on the closing date. After all, finance charges or other fees may be added.
As such, if you pay your credit card balance off before your closing date, there's a chance that you will still have a balance due. Even if it is a small difference, you would have to go through the process of making another payment. (There's also a chance you will overpay, which would lead to a carryover on the next balance.) However, this is very easy to resolve, especially with online banking and bill payments.
Why You Should Pay Off the Balance by the Closing Date
While knowing the exact amount you owe is one reason to wait to pay until after the closing date, there are also good reasons to pay before the closing date. Most importantly, it will boost your credit score slightly.
That is because when your credit card issuer reports your balance to the credit bureaus, it will be $0 (or incredibly low). This will improve your credit utilization ratio. As that is one of the factors influencing your credit score, keeping that ratio nice and low can boost your score.
Other Credit Card Dates to Be Familiar With
While the payment due date and closing dates are among the most important dates you need to know for your credit card, there are a few others as well.
Credit Reporting Date
Not all credit card issuers will have a monthly credit card reporting date, but many do. This refers to the date that the card issuer reports your payment history and balances to the credit bureaus. Some card issuers will send this information less frequently.
The card issuer reports the following to the credit bureaus:
- Account status
- Credit limit
- Most recent payment amount
The grace period is the time from the closing date to the payment due date. You are not charged interest during this time.
Keep reading: Should You Get a Credit Card at 18?
Your credit card closing date is the last day of your billing cycle. It is the date on which the credit card issuer calculates your balance due. It will usually be about 20 to 25 days before the payment is actually due. However, getting in the habit of paying down your balance before your closing date can help you improve your credit score. This is not necessary, but it can be a good financial habit to get into.
Shawn Manaher is a former financial advisor, has founded 5 online businesses, and is a coach, speaker, podcast host, and author. He's been featured on Forbes, The Consults Corner on TAE Radio, The Writing Biz, What's Your Story, and more.