If you don't know how to read your credit card statement, you could be missing out on vital information that affects how your finances are reported to credit bureaus. You must understand the various terms used on your statement to plan your budget for the month, because when you don't know what things like "closing date" represent, you can't act accordingly. While it may seem inconsequential at first, the closing date for your credit card statement can have a major impact on your credit score.
Next Closing Date Credit Card Meaning
To better understand your credit card billing cycle and due date, consider that the statement closing date for your credit card is the date that the current billing cycle ends, while the due date is the deadline for your next credit card payment. The credit card company calculates the interest you owe based on the amount you owe as of the closing date, and it also reports the amount of money you owe to the credit bureaus.
If you make a payment before the closing date, you owe your creditor less money as of the closing date, meaning that when they calculate your interest, it won't be as high. Further, you'll find there's a grace period between the closing date and payment due date during which you can reduce your interest. Whether you want to locate your American Express billing cycle closing date or your Capital One statement closing date, you can take a look at your recent statements to see the length of the cycle and the typical day it falls on.
Effect on Your Credit Score
Knowing the next closing date on a credit card helps with planning your budget so your credit behavior will have a positive effect on your credit score. Even more importantly, it helps you avoid a negative report to the credit bureaus. For example, if you have a credit limit of $500 and have used up $455 of that limit as of the closing date, that number is reported to the credit bureaus -- and it doesn't look good.
Even if you pay off the card in one payment, doing it after the closing date means that your high percentage of card utilization was reported. Paying off the card before the closing date, however, means that the amount you are reported to owe is now $0.
Credit Card Spending Tips
The best time to use your credit card is immediately after the closing date, as this gives you the most time to pay it off before being charged interest. Interest doesn't accrue on your card immediately -- it is calculated on the closing date, so if you pay off your card before that date, you don't owe any interest.
For example, if you use your credit card to make a major purchase the day after a closing date, the charge shows up on the next month's bill. Making the payment before the next closing date, then, gives you a window of 30 days or more to pay off that major purchase before it collects interest.
Effective Utilization of Credit
Now that you are planning your payments according to the closing date, you need to know just how much to pay off. Of course, if you can pay off your cards in full with each billing cycle, this has the best effect on your credit score. If you are balancing payments on multiple cards, however, distribute payments across the board so that each one ends up below 10 percent. When you only use 10 percent or less of your available credit, you receive favorable reports from the credit bureaus.
- Consumer Financial Protection Bureau: What Is a Grace Period for a Credit Card?
- Office of the Comptroller of the Currency: This Month My Due Date Falls on a Sunday. I Mailed My Credit Card Payment and It Has Not Arrived There Yet. If the Payment Is Received On Monday, Will It Be Considered Late?
- Experian: What Is a Credit Utilization Rate?