You might be wondering can I use my credit card before the closing date?
Let’s guide you down this road. Your credit card transactions are billed to you in periods of time known as billing cycles. The last day of the billing cycle is your account statement closing date.
Why Does Your Statement Closing Date Matter?
Your account statement date is significant for a few reasons. This is the date finance charges are calculated and added to your balance based on your credit card activity during the billing cycle.
Account Statement Closing Date vs. Payment Due Date
Your account statement closing date is not your payment due date. You’ll have several days after your account statement closing date to send at least the minimum credit card payment and keep your account in good standing.
Your payment due date should be at least 21 days after your account statement is mailed to you to give you enough time to make your credit card payment.
If you pay your balance in full by the payment due date, you won’t have any interest charges on your next billing statement.
Your payment due date will fall on the same calendar date each month, which makes it easier to ensure your payment is made on time.
Many credit card issuers will allow you to change your payment due date, with some allowing several changes in a calendar year.
This can be useful from a budgeting perspective. For example, you may prefer to have the payment due at the beginning of the month, instead of at the end, so it better lines up with your paycheck and cash flow.
Can I Use My Credit Card Before Closing Date?
By making a payment before your statement closing date, you reduce the total balance the card issuer reports to the credit bureaus. That in turn lowers the credit utilization percentage used when calculating your credit score that month.
Lower utilization is good for your credit score, especially if your payment prevents the utilization from getting close to or exceeding 30% of your total credit limit
When you’re young, credit cards seem fairly straightforward: the credit card company pays for purchases on your behalf and you pay them back.
Then, you start learning more about credit, interest, and other financial ins and outs and you realize that the system is more complicated than simple dollars and cents.
How Your Statement Closing Date Affects Your Expenses?
If you’re on a budget or keeping an eye on your finances, your statement closing date affects your monthly expenses in concrete ways.
First, credit card companies charge interest based on the balance on your card on that closing date. If your card has a balance of $1,000 and you pay it in full on the day of closing, you pay no interest on it. If you pay it in full on the day after closing, you pay interest on the full $1,000.
Your next minimum payment is also calculated using the balance you had on your closing date. While it’s not wise to make only the minimum payment on a credit card, there may be times when money is tight and it’s your only option.
In these cases, that minimum could be significantly higher or lower depending on what your balance is on your closing date.
How Your Statement Closing Date Affects Your Credit
If you’re paying attention to your credit, you may know that one significant factor in your credit score is your credit utilization ratio. This is the percentage of your revolving credit that you’re currently using.
To clarify, “revolving credit” is any type of credit you can use, pay off, and then re-use. For instance, credit cards are revolving credit because you can max them out, pay down the balance, and then re-use the balance that you had paid off.
The same is true for lines of credit. This is different from credit products like car loans which you simply receive once and pay off once.
To calculate your credit utilization ratio, credit bureaus total up your credit limits for all your credit cards and other forms of revolving credit.
Then, they total up the balances on all those revolving credit products and see what percentage of your available credit is being used.
When the credit card companies report your data to the credit bureaus every month, they report your balance as it was on your statement closing date.
So, for calculation’s sake, let’s say you have one credit card with a $1,000 limit and you use it to make a $500 purchase.
If you pay it off the day before your closing date, your credit utilization ratio is 0%. If you pay it off the day after your closing date, that ratio is 50%, which can visibly hurt your credit score.
How to Use Your Statement Closing Date Wisely
Now that you understand your statement closing date and how it affects you, how can you put that knowledge to good use?
Start by checking when your closing date is. It should be on the same date every month, although credit card companies will occasionally change that date so check your closing date every so often.
Then, put your monthly closing date on the calendar so you always know when it will be. Finally, if possible, put a recurring monthly reminder on your calendar to make your payment several days before your closing date.
This way, you’ll always have the lowest possible balance when your closing date rolls around. Your wallet and your credit score will thank you.
Thank you for reading this article on can I use my credit card before the closing date. As you know your credit report is such a vital part of your financial stability and your ability to access things you need like housing, utility company accounts, and even jobs.