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III. The Credit Card Timeline In Chapter 7, The Credit Conundrum , you learned that every time you use credit, you burden yourself with debt . Whatever is borrowed on a credit card must be repaid. That’s where credit cards can get tricky. Credit card payments must be made within a specific period of time, or else steep interest charges and fees are tacked onto the balance. Understanding how your credit card repayment timeline works is important for keeping the credit card beast on the leash. Here are some key credit card dates and concepts you should understand: Billing Cycle. Credit card payment periods are divided into billing cycles . But here’s a weird thing about credit cards: A billing cycle typically does not start on the first day of the month. It often starts on or about the 24th of the month and runs for 30 days. Closing Date. The last day of the billing cycle is called the billing cycle closing date . Everything bought on the card from the start of the billing period to the closing date goes into that billing cycle. Anything bought after the closing date goes into the next billing cycle. For example, a billing cycle that opens on July 24, closes August 23. The next billing cycle opens August 24 and closes on September 23, and on and on. Grace Period. The billing cycle closing date signals the beginning of the grace period . This typically lasts 21-25 days . At any time during the grace period, the card holder can pay off all of the charges from the last billing cycle without having to pay interest on them. The grace period expires on the payment due date . Payment Due Date. When the grace period expires, payment is due! Any payment received even one day after the Payment Due Date will be considered 30 days late. This will result in a late fee and may even cause the card rate to jump to the penalty (default) APR. Calendar your Credit Card Time Line. When you get a credit card, you will be provided with a Credit Card Disclosure . Read it carefully and spend a few minutes figuring out your credit card’s timeline. In fact, it’s a good idea to enter the credit card timeline dates into your personal planner or e-calendar . We’re all busy and it’s easy to forget about dates and deadlines, but it’s really important that you don’t miss a payment or make a late payment because of the costly penalties that can be triggered by these actions. If you have more than one credit card it’s likely they will have different billing cycles, grace periods, and payment due dates. It can get confusing, so have a system in place to ensure that payments on all your credit cards are made on time . Reflect on Learning: Check out the calendar on the next page. If a 30 day billing cycle opens on July 15 and closes on August 14, when would the grace period begin? Answer: On August 15. What is the significance of the grace period? Answer: You can pay all of the charges made in that billing cycle without having to pay interest. If the grace period in this example lasts 22 days, what is the payment due date? Answer: September 5. Circle and label the billing cycle dates, the billing cycle closing date, the grace period, and the payment due date. PRODUCT PREVIEW
Chapter 13 | Credit Card Craze 244
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