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

Billing cycles

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.

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“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.

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.

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).

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.

8 thoughts on “What you don’t know about billing cycles will blow your mind

  1. Trying to cancel at the last minute of the last day of your billing cycle will lead to issues. I would suggest a couple days before. Why? Like everything else related to billing, the company will make it work to their advantage. 11:59 in what time zone? If you live in California but the company is based in New York, then you have missed the “end of day” by 2 hours since it is already tomorrow on the east coast. They can also play tricks with the notice saying it has to go through channels before it is official which can take hours.

    And statement credit. Just because it does not show up on your next actual printed statement does not mean the refund was not immediately applied to your account. One of the great things about the internet and being able to mange nearly every type of account you might possible have online is you can see when various items actually post to your account. If a refund posts on the same day as your monthly statement is generated, then it may not show up on that statement, but it is not being held back. Your available balance reflects the refund and interest calculations will as well. If you do have a credit card that is not posting refunds immediately — close the account today and move your business elsewhere.

    I also feel that the Card Act, and many other consumer protection laws passed during the prior administration, are unfortunately not long for this world. And that is a bad thing.

    1. I might agree, but I believe that there is a three hour difference in time between Los Angeles and New York; not two. Even so, with your example, it would still be the next day in New York.

  2. ” Rather, they are opportunities for fudging dates in order to earn an extra dollar.” I reject the word “earn.” Earning requires doing something to benefit the payer. Please edit “EARN” to “extract” or “steal,”

  3. Do any experts know how the enforcement provisions of “Regulation Z” operate? The regulation refers to other sections of the Truth in Lending act but a quick look by a non-expert indicates that at 15 USC 1607, agencies like the FTC can enforce the law and under 15 USC 1635 a court can make you whole, but it is unclear if there are any other remedies for Regulation Z itself or how the system operates.

    1. I am a bank compliance specialist. Reg Z is enforced bythe Office of the Comptroller of the Currency (OCC). And the CFPB can also be involved if the individual’s compliant is considered a UDAAP violation. We are rigorously examined by the OCC for adherenceto Reg Z. Consequently, we have significant controls in place to adhere to it. Reg Z provisions will often trump other regulations, when they appear slightly contradictory. That happens to be a frequent issue, by the way, across the spectrum of regulations. Adhere to one, and you are in conflict with another!

      The Card Act is overall a good piece of legislation, in my opinion. Its protections are necessary and generate good business practice. The Durbin Act, which is part of Dodd-Frank, is another matter entirely. The industry is pretty united in opposition to it, as it has added costs, and not benefitted consumers

      If you think your bank has not been consistent with Reg Z, reach out to your banker. If you do not receive a satisfactory explanation, or feel that you are not getting resolution, contact the Consumer Finance Protection Bureau with your complaint. I garantee that will get action. But make it your second choice. Many of the complaints I see are rooted in misunderstanding, not violations.

      A final note, in my company we recognize that good regulatory compliance means a better client experience. However, some regulations are counterproductive to a good experience.

      1. Thanks for the information. So do banks have to put the money back in the credit card account in 3 days, and if so, why does it usually take more than 3 days to appear even on the pending transactions on the bank website? See article above that “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.”

        1. Don’t get me started about contradictions in regulations..:) I don’t expect any sympathy for the banking industry, but we do struggle all the time with inconsistency from one regulation to the next, regarding the same activity. Even when a regulator attempts to reconcile these differences, it can take many years for clarifying language, and still result in less than satisfactory results.

          But I digress. In my experience, most merchants and banks play by the rules. Timing can make it appear otherwise. If, for example, the credit to your account is being processed too close to the statement date, it will miss the cutoff for the current month’s statement, i.e. April. Then you won’t see it until the May statement, even though it may have been posted to your account, and may have reduced your actual balance outstanding.

          So, why aren’t you seeing it online? That depends on the bank that issued your card, and what they are actually displaying on their website. Consumers assume it’s real time information, but it may not be. Ask your bank, to be certain.

          Credit card rules and regulations are actually very complex, and impact what you are seeing on your statement. If we were discussing what happens when rates rise and fall, that complexity would very clearly illustrated.

          It’s important to read the disclosures that are provided with your application, and with your card. The legalese is frustrating, but the explanation for just about everything is contained in them.

          I hope this has been helpful.

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