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Credit Cards: Billing Cycles and Bimonthly Paychecks

After reading about the great credit card debate, one of my friends wrote me about some hijinks her credit card company have been pulling on her:

Generally all of my due dates have been around the 19th of the month, but in December one of my cards moved to the 13th. Then this month, the due date was the 11th – a whole week earlier than my original due dates.

Of course I am a normal American who only gets paid 2x a month, so if the payment due date suddenly gets moved to before I get paid, then I’m in trouble! I called the company and they waived my fees and changed my due date. But when I asked them to please explain why my due dates were changing so rapidly, he looked into it and found that the company had changed its policy a few months ago.

Previously they had a 25 day billing cycle, and had now moved to a 20 day billing cycle! I told him that was persecutory because I don’t even have 3 weeks to receive the bill and pay it! He gave me another department to talk to about changing the billing cycle, but I told him that if it doesn’t change that I will no longer use the account.

Why do credit card companies pull this kind of thing? Obviously it makes them more money on interest and late fees, but it also loses them customers.

One money myth to explain this is that good customers who pay their bills on time (and who carry no balance or a very small one) make the credit card company lose.

True, they’re not as profitable as people who are constantly accruing lots of interest or don’t pay their bills on time and get lots of late fees. But for every purchase you make with a credit card, the company gets to take something like 3%.

So suppose that I’m one of those people who does all their monthly spending on the credit cards (for rewards purposes) and then pays it off at the end of the month. If my monthly spending is around $2000, then the credit card company makes $60 off me each month. Which comes to $720 each year.

Not great, but they’re getting money from the account nonetheless.

The company may be getting even more from my friend if she carries a balance. Why risk her business? Their loss, I suppose, and her gain–since she also asked me which of Dave Ramsey’s books I’d recommend…and we all know where that leads.

Edit: It was Bank of America that did this, btw, my friend updated me on that.


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Millionaire Money Habits January 13, 2008 at 4:15 pm

I’ve been hearing about these maneuvers from CC companies quite a bit lately. Are they purposely trying to catch people off guard so they can make some extra money off late fees, etc?

vh January 13, 2008 at 5:14 pm

Wow! That really is a nasty stunt. I’d like to know which credit card issuer did this — it’s a good reason to avoid them. And the question of why card issuers pull these things is a good one. It doesn’t take much for me to stop using a card–so the outfit might soak me once for unfair finance fees, but it will never get another penny from me or from all the merchants I shop with, who have to pony up a cut from every purchase I charge.

As I mumbled on my own blog, leveraging the credit card is an important part of my budgeting strategy. I guess if my credit card issuer starts doing that, it’ll be back to using paper checks for moi. Too bad!

Julie January 13, 2008 at 5:19 pm

I do the exact same thing each month that you do, Mrs. Micah. I actually just placed an order for a $75 Visa gift card with my points, so I’m very excited about that.
I saw a movie a few months ago about credit cards and apparently the companies call the good people like us “dead beats”. What a strange business.

Tasha January 13, 2008 at 5:39 pm

God, this is horrible! I’m already annoyed at how the interest works in my partner’s student loan, please not this one too!

Ryan S. January 13, 2008 at 6:17 pm

When Chase took over my Visa (I think it was First Card before that), they shortened the billing cycles; now I rarely use it. Discover has 30 day billing cycles and pretty decent customer service as well as really nice reward programs. I use them almost all the time except places that don’t take them (Costco only takes AmEx, the bike shop I frequent doesn’t take Discover but takes almost everything else) or it’s some kind of special reason (like at for more points or electronics where I want an extended warranty)…


Kiran January 13, 2008 at 6:18 pm

I normally receive my bill on the 17th and its due the following 6 or 7th. I never carry a balance.

Last month I received my bill on Christmas Eve. and it was due on Jan 2nd. I paid one thousand extra on the bill just so if it was late I wasn’t paying interest on anything much.

This was the shortest time between statement being received until due date that I’ve ever had.

RacerX January 13, 2008 at 8:17 pm

I recieved my CitiBank LOc bill for the month and basically had 7 business days to pay it. The fastest my bank can get it to that Citi account is 5 business days, then they auto-cahnge a $29 late fee.

It had a statement date of 12/27 so basically they had more time to get the bill to me than i did to pay it!

Dad January 14, 2008 at 1:42 am

Actually there is a mixture of fact and myth here. A card holder that spends a lot of money each month and pays it off is called a transactor. The CC makes money on the fees merchants pay. A cardholder who runs a balance is called a revolver (from the term revolving balance loan). Both of these customers are profitable to the company. I learned to use my card as a transactor. I use it to pay expenses I would make anyway and pay in full at the end of the month. This puts me in a favorable status with the CC company. I don’t maintain multiple cards becuase it would be too hard to manage it this way and would weaken the effect with each company.

The truth is that if you use a card for a few hundred dollars a year and don’t pay any interest or fees, the company that gave you the card is losing money on you. Why would they want you as aa customer. You are not a deadbeat but you are not profitable. In some form or the other all credit card companies will be like this. If you use cards at all, you will be in this situation. There are other factors to consider which I will get to in a moment.

In a job I once help with HP (while Hewlett and Packard were still alive and running the company,I met them both, it is not the same company these days and hasn’t been for 10-20 years now). I was shocked to learn from the corporate objectives of this company considered visionary and exemplary that its first corporate object was profit. As David Packard said in his book, The HP Way, it is impossible to operate a business for long unless it generates a profit. For one thing it could not pay its employees. Consider the company you work for, if it did not make enough to cover its costs, it would not be able to pay you and you might lose your job.

However (and a big one), the need of a company to make a profit does not mandate that it make an overlarge profit. There is pressure from those who invest in a company and who in a sense hire to CEO and managers of a company to make what they define as a reasonable return on their investment. If you invest in a CD, you want to get a reasonable interest rate. Stock buyers feel the same way and operate on a much larger scale. They will and do fire CEOs who don’t achieve results.

There is not only the question of how much profit the company should make but how it achieves it. Are the feels and terms and conditions fair. Be careful how you define fair. If you ask the question is it fair to me, you will probably reach a biased and unsupportable view even though that is what means to most to you. You need to ask is it fair to some person down the street that you don’t know. 51% of Marylanders polled said that the new sales tax rate in that state was not fair. I’m sure they meant, it hurts me and it is never fair if I am hurt. You might get a better idea if you said if I own the company and this credit card user does this, is it fair for me to charge this fee or insist on these conditions. Consider if the card holder owed you personally. What would your view be then.

In summary, I see that it is necessary for the CC company to make a profit. How they make the profit is a subject for debate. They can do it fairly or they can do it in a tricky manner. A credit card is not a right but something the company grants you under conditions. Pay attention to the conditions. Most people don’t read the terms. Watch for tricks used to confuse you or cause you to fall into one of the fee charging conditions or interest rate increasing conditions. If you are going to use a card, shop wisely, understand what you are getting into. Companies only advance the money for your purchases (which is a form of loan form day of the purchase until it is paid off) if they can make a reasonable profit for their efforts and costs.

Are there bad cc company practices out there? There sure are. Try to understand the business point of view you would have if you owned the business and get an idea what you would then think is fear. Then shop around and see what you can get.

Sorry to be long winded. But there is a lot of lack of knowledge in this area and a lot of knee jerk reaction that comes when the situation hurts you. Good luck all.

Debt Free Revolution January 14, 2008 at 12:46 pm

Yup, AmEx tried that game with me…they “died” anyway never to be used again! And y’all thought it was just me!

Philip Brewer January 15, 2008 at 10:34 am

I see three reasons why credit cards would do this. (Although they all boil down to more money for the credit card company.)

First, it’s 5 days that they’re not making an interest-free loan to the people who pay their credit cards off every month.

Second it’s more late fees. Even if they wave the late fees of people who get taken by surprise by the change, every month there’ll be some number of people who could have paid on time with another five days but can’t meet the new deadline and get hit with a late fee. Those late fees are a substantial part of the credit card company’s income.

Third, it’s an early-warning system for the people who are about to go under. Except for the surprise transition, anyone who can pay in 25 days can pay in 20 days. It’s probably worth quite a bit to get the extra 5 days of warning when someone who had always been a perfectly good customer suddenly stops paying.

The credit card companies always justify their more onerous terms (late-payment fees, much higher rates for people who miss a payment) by saying that these are very accurate indicators for customers whose accounts eventually need to be written off. I’m sure that’s self-serving–most people who miss a payment don’t go on to declare bankruptcy–but I don’t doubt that it’s also statistically true. Even a few extra days warning might substantially mitigate losses involving these customers.

Bernard Ng January 16, 2008 at 5:21 am

Well, this is really nasty. Don’t they send out letters to inform their customer if it is a change of policy? Or is it some fine print which we could hardly see?

!wanda January 16, 2008 at 11:57 am

I use electronic billing to pay my credit card bill, and I check the website every other day or so to see if the charges are correct and review things like the due date. My old card used to move the due date around quite a bit, so keeping things monitored meant I never missed a due date.

My Dollar Plan January 16, 2008 at 2:31 pm

If it catches you off-guard it could be a problem. I always look at each bill I have very closely to make sure I pay in full by the due date.

Jill January 16, 2008 at 3:00 pm

I used to work at Citi during college from 1998-00. Cit would routinely change the billing cycle from 27 days to 20 days on customers who were paying their bill in full every month. When customers complained, employees were told to say it was a ‘reward’ for paying their bill off every month. In reality, even employees saw it the ploy for what it was – just a way to trip up those who paid off the balance in full every month. I’m all for companies making a profit, but it always seemed a little under-handed to me.

speedy January 16, 2008 at 7:30 pm

I keep credit cards from my own banks, plus a Citi card. I monitor my accounts online daily (not just to check the due date, but to look for unauthorized charges). I also request alerts when a statement is ready or a payment is due.

Usually, I open the statement and schedule the payment the same day I receive it, so I will never be late and have no need to worry. Citi will even alert me whenever a payment posts to my account, so I will know that the payment has been made.

I am enjoying the cash-back rewards a lot (to the tune of hundreds of dollars per year), and I do not want to run afoul of my benefactors… um…I mean my credit card issuers.

Aedon January 17, 2008 at 1:07 am

It’s interesting that Bank of America was the one that did this to your friend. I’ve had a card with them for a couple of years, and the date has always fallen on or around the same time each month. Then again, I’m one of the ones who carries a balance from month to month, so perhaps the difference in our habits has something to do with that…

It’s always a good idea to keep on top of electronic statements, if they’re available. Even if the printed copy is delayed, the electronic version is available so you can verify important information like due date!

Nick January 17, 2008 at 8:53 am

I had a similar problem to some people here with my Citi card. In December 06 I was reviewing my statement and realized that I had late charges on it. Like many people, I get paid 2x a month… on or before the 15th and on or before the last day. My due date was always after the 15th and I usually paid it on the 16th. As a long time Discover card user, I had taken for granted that the bill date did not change, but this was not the case. Basically, what had happened was that I had paid my bill early a couple of times, and as a “reward” their system automatically shifted my due date up a week without much notification (it was on my bill, I just didn’t notice 🙁 ) , making it due on the 12th. Customer service removed the charges and supposedly fixed my due date back to the 2nd half of the month and assured me it would not happen again, but I found the entire process to be an extremely shady way to go about business. I use Discover whenever possible and have had no problems with them other than they aren’t accepted everywhere.

LisaB January 17, 2008 at 11:12 am

Wow, that’s something I did not even consider.

One of the things I do now is to pay all my cc bills online. As soon as I get a new bill I schedule the payment, even if it’s a couple of weeks away. After forgetting to pay a bill and getting slapped with late fees I learned my lesson.

But I have a slightly different story. The expiration date for my Citi card came around and they issued me a new one but I was out of town. When it took too long to get to me I called to check and they said they would cancel this one and send another one just in case it was stolen. No problem there. However when I tried to check my bill online I couldn’t get in. They had automatically removed my online access to my expired card. (I had stopped paper statements a while back.) I missed the payment on the card and they charged me late fees and jacked my rate to the default APR even though they were the ones who cut off my access. After much complaining to customer service I got most of it reversed but I learned a valuable lesson in Due Diligence. I check my accounts online every 2-3 days and schedule payments in advance. I am not as naive as I used to be.

Derrick F March 3, 2008 at 4:53 pm

Bank of America upset me so badly that they were the first card that I closed ASAP. I really really want the Alaska Airlines Card but refuse to sign up because it is Bank of America.

neil September 10, 2008 at 10:51 am

My friend, please note this is not because the bank will have more defaults and so it will earn on late fees. That is incidental.

It is because of the liquidity crunch. Banks (in general) dont have funds to lend to customers and by reducing the tenure of credit by 5 days, the bank will have better cash flow and it will improve it liquidity.

Please note i m not justifying what the bank did with your friend, i m just clarifying the science beyond this act !


Pam January 15, 2009 at 8:06 am

Why can’t credit cards keep the same due date. Like a dummy, I assumed I had the same or around the same due date each month. But noticed every month the due date is 6 days earlier than the previous. Just got slammed with a late fee. Last month it was due on the 17th, this month the 12th.

Joanna February 10, 2009 at 7:21 pm

It’s not only credit cards; it’s vendors too. In No. California our TV service provider, Comcast, has about a 17-day cycle. I called to complain and was told that “most” of their customers pay online or by auto withdrawal from a bank account.

Really? Most? “Most” haven’t learned about keeping their data safe from those all-too-frequent thefts of laptops and client banking & account information? And think of the hassle for you when there’s an access glitch!

Shouldn’t payment options be the decision of the customer?

Joanna February 10, 2009 at 7:35 pm

By the way, re the earlier comment that credit card companies going to a shorter billing cycle means that they’re not making an interest-free loan to the people who pay their credit cards off each month,

credit card companies charge merchants a percentage of the transaction amount, with a dollar minimum. That’s their payment for service; their revenue stream. There is no big-hearted interest-free lending on their part, just more ways to tighten the screws on their unsuspecting customers.

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