What you don’t know about billing cycles will blow your mind

Billing cycles can really mess with your head.

Don’t take my word for it. Consider what happened to Michael Dearing, a registered nurse from Chicago, when Comcast adjusted — or in his words “played with” — his billing cycles recently.

“For about two years, our due date was always the 24th,” he says. “Then, over the next 12 months, the date moved to the 23rd, then the 20th. By the time the year was up, a few months ago, the new billing date was the 17th — a full week earlier.”

Ah, billing cycles! The mysterious corporate actions to remove money from your bank account on a pre-determined day — or to return it. While it may be a source of profit to the company, it’s also an endless cause of aggravation to customers like Dearing, and maybe to you, too.

There are two billing cycles that really matter. The first is a cycle for a recurring service, like a cable or phone bill. And the second is the billing cycle used by your credit card company for refunds. Both of them come into play when you’re paying starting or ending service. So if you’re thinking of canceling your cable or wireless bill soon, pay attention — this could really help.

“Because we can”

Billing cycles are pretty arbitrary. A lot of customers end up on the wrong side of a billing cycle when they cancel their service halfway through the cycle and are charged for the rest of the month. Why? It’s in the fine print.

“When I called Comcast to complain, I was told that it was their right to change the billing date,” remembers Dearing. “To me, it’s like an additional billing period just because they can.”

Comcast publishes a page that annotates its complex bills, but only mentions cycles twice in passing. There are, however, plenty of complaints about the company changing its cycles and billing for two months in a single month. A Comcast representative told Dearing the company could only keep its dates unchanged for customers “who only have one service” but not for him, since he subscribed to both cable and Wi-Fi.

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That makes no sense. Companies move up their cycles because having your dollars in the bank even a day earlier can have a noticeable impact on its revenues. Time is money, after all.

The takeaway? For a recurring service, it’s more important than ever to know your billing cycle and to pay your bill on or before the due date. Otherwise, you could accrue late penalties and in extreme cases, have your service discontinued. Also, be sure to cancel only on the last date of your billing cycle. And pay attention: Companies can shift their cycles to suit their whims, and you have to keep up.

One way to avoid getting caught with a late bill is to set up autopay, but you need to monitor the monthly amounts, just in case the company decides to raise your rates with little or no warning. That happens too often.

Credit card billing cycles explained

When it comes to credit cards, billing cycles present an entirely new series of challenges.

When you open a new credit card account, the card issuer assigns a billing cycle. For example, if you open an account on July 2, your card may assign a cycle from July 2 to Aug. 1.

“In this case, every month would hold this same schedule where billing cycle starts on the 2nd and ends on the 1st of the following month,” says Alex Cramer, head of cards for Final, a digital credit card company based in Oakland. Some card issuers allow you to change your cycle, but they won’t allow you to change it to manipulate the due date and avoid late payments. Alas, only the card companies can do that, and their ability to play with the calendar is limited. They can change a billing cycle, but only from time to time, either at the customer’s request or for “operational” reasons.

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Manipulating billing cycles or due dates by card issuers to trap consumers into missing payments or paying additional interest charges may be against the law, but not so long ago, card companies played with the calendar for their benefit.

Issuers used to impose something called double-cycle billing, which effectively charged two billing cycles worth of interest even if the cardholder paid off the entire balance in the first billing month. Fortunately, the 2009 CARD Act banned that practice. If parts of the CARD Act are overturned with new legislation, we could easily go back to this.

During a billing cycle, purchases, returns, fees, interest charges, payments and other fees will affect your balance. At the end of the billing cycle, your credit card company issues a statement balance for that period.

The real problems with billing cycles happen during a refund to your card. That’s when a company promises to return your money, but the funds don’t show up for weeks, and sometimes months.

Vague government guidelines

Even government guidelines on refunds are at best, vague. Consider the Federal Trade Commission’s guidance on refunds, which states:

If the customer paid by cash, check, money order, or by credit where a third party is the creditor, or by any other method except credit where you are a creditor, you must refund the correct amount within seven working days after the order is cancelled.

If the customer paid by credit where you are a creditor, you must credit the customer’s account or notify the customer that the account will not be charged within one billing cycle after the order is cancelled.

How is it possible for seven days to mushroom into two months? Easy. Companies and credit card issuers are allowed to take up to two billing cycles for your refund to actually be issued. I’ve lost count of the number of times consumers have lost patience with a company, believing they’re stonewalled. But the company is just doing what it legally can. Check out my FAQ section on credit cards for details on how refunds work (or don’t).

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Regulation Z

Oddly, the extended refund timelines appear to be a direct violation of Regulation Z, which governs certain refunds, which states that the card issuer shall “within 3 business days from receipt of a credit statement, credit the consumer’s account with the amount of the refund.”

It’s often hard to know if the credit card company is delaying or if the company you’re doing business with is dragging its feet. Getting the truth from either party is close to impossible.

“Credit card billing cycles are often confusing to people,” says John Ganotis, the founder of Credit Card Insider, a credit card site.

But they aren’t confusing to your credit card company. Nor are billing cycles a problem for the average company. Rather, they are opportunities for fudging dates in order to earn an extra dollar. It’s all the more reason to know about billing cycles. Find out when yours start and end. Pay your bills on time and cancel at the right time (that would be at 11:59 p.m. on the last day of your cycle, in case you were wondering). And be aware that your credit card company is allowed to take its sweet time with a refund and that there’s nothing you can do about it.

What’s that? There ought to be a law, you say?

Please, don’t get me started.

Christopher Elliott

Christopher Elliott is an author, journalist and consumer advocate. You can read more about him on his personal website or check out his adventures on his family adventure travel site. Contact him at chris@elliott.org. Read more of Christopher's articles here.

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