Billing Cycle

What Is A Billing Cycle?

A billing cycle refers to the number of days between the last billing date and the next billing date for goods or services provided to a customer repeatedly.

Deeper Definition 

A billing cycle is an interval between a recurring payment. It can apply to various services that businesses provide to customers, such as subscription services, utilities, and credit cards. For instance, many credit cards have a cycle of 28 to 31 days, depending on the card issuer.

A billing cycle is often every month. However, the duration can vary depending on the service rendered and the service provider. Usually, the calculation begins from the date of the first purchase or fixed calendar date. You can find information on this in the terms and conditions of a product or service. You should know the service’s billing cycle before subscribing to it to avoid penalties when one misses the payment day.

Depending on the kind of service, missing a payment cycle may attract additional charges. Customers may get a grace period to make the payment. A grace period is a limited time after a due date during which a customer can still make the missed payment without penalty. In some cases, the punishment for missing a payment is to stop the service indefinitely until your next subscription to the plan. 

For credit cards, the majority of the card issuers report the actions you take on your account at the end of each billing cycle, usually monthly, to the credit bureaus. For instance, you owe $5000 and pay $150 at the end of a billing cycle. If you miss the payment or make the payment, they would note in a monthly report they sent to the credit bureaus, affecting your credit score.

Billing Cycle Example

A billing cycle refers to the number of days between a recurring payment. Usually, the tenure varies based on the product or service rendered.

For instance, a Music Player app may charge you a monthly subscription fee that grants you access to their unlimited library of songs. As long as you keep making payments at the end of each billing cycle, you have access. If you miss a payment date, the app withdraws your access to the unlimited library.