What is the Closing Date on Your Credit Card?

You always pay your credit card bill on time, to the point that you have a sense of pride about it (and rightly so!). However, this month you see an interest charge on your account, sparking confusion. If this has happened to you, it could be because you misunderstood your credit card closing date rather than intentionally making a late payment. It’s a common mistake and, unfortunately, it is quite easy to mix up the closing date with the payment date, even though they serve two very different purposes.

Understanding closing dates

A credit card’s closing day is the final day of your billing cycle. It is the point where your issuer totals up all transactions over the period including each purchase and payment. It may also include applicable interest charges and relevant fees. If your card charged an annual fee during the period, it will also show on your monthly statement.

Any transaction that happens after the closing date will NOT appear on this month’s statement. Instead, they will fall into the next billing cycle. For example, imagine your billing cycle runs from August 15 to September 14. Any purchase made on September 13 will appear on your credit card statement. But, a transaction from September 15 will not, as it happened after the closing date. In this case, the purchase will be on the upcoming statement which has a closing date of October 14.

Read More: Reading Credit Card Statement

Are payment date and closing day the same for credit cards?

While they seem similar, there is a distinct difference between the closing date on credit card cycles and the payment due date. As previously mentioned, the closing date ends your cycle. The due date, on the other hand, is the last day that you can make the minimum payment on your balance before late charges will apply.

Why the Closing Date Matters

The closing date plays a big role in your finances because, on this day, your issuer locks in the balance of that billing cycle. That number will then become the amount shown on your month end statement. In many cases, it is also the figure reported to Canada’s two major credit bureaus.

Your closing date matters because it not only shows what you owe to the issuer, but also how your credit profile appears to lenders.

It’s also important for:

Interest calculations

Interest charges rely on the closing date. In Canada, the period between this day and the payment deadline is a minimum of 21 days. During this time, you are not subject to interest charges. However, the grace period is not applicable for cash advances and other similar transactions. It also doesn’t apply to balance transfers.

What happens if you don’t pay your balance by the payment due date, though? In this case, interest charges accumulate starting on the day after closing. For more details read how credit card interest works in Canada.

Read More: Best Balance Transfer Credit Cards, Best Low-Interest Credit cards

Credit utilization

The closing date can impact your credit utilization ratio. As I mentioned above, lenders usually report the balance that appears on your statement. This means that if you make a large purchase just before the cycle ends, it could temporarily inflate your utilization. And it can happen even if you pay off the purchase before the payment date. What matters is the balance that is reported to the credit bureau as it is part of your credit score calculation.

Strategies to Use Your Closing Date to Your Advantage

Understanding your closing date gives you more control, allowing you to be more strategic about when you spend and how you make your payments. You can use your closing date to do the following:

• Lower your credit utilization. If you are trying to boost your credit score, you can work to reduce your reported utilization by paying down your card a few days before closing. A smaller balance at the time of reporting gives you a lower utilization ratio, which can help you maintain a better credit score (even if you make your monthly payments on time).
• Maximize your grace period. Timing large purchases right after your closing date helps you benefit from the interest-free window.
• Cash flow planning. If you use your credit card to cover your regular bills, you can coordinate to pay the charges right after your closing date. This will, in turn, allow predictability while pushing them into the next billing cycle.

Takeaway

The closing date found on your credit card statement is the end of your billing cycle when the issuer records your balance. It differs from the payment date. Confusing the two can lead to unnecessary interest charges and a temporary dip in your credit score, so be careful!

By knowing your credit card closing date, you can use it to your advantage. Not only can it help you stretch your cash flow, but it can also help enhance your credit profile.