Some credit cards charge an annual or membership fee. To understand how finance charges are computed, it is necessary to review several terms. Refer to the sample Billing Statement in Figure 1 for specific illustrations. First, most credit companies base their finance charges on their monthly billing cycle. The billing or closing is the last day of the month that any purchase or payments have been recorded in the account.
Most credit cards use a calendar month.
In Figure 1, the closing date of June 2 would likely include all purchases and payments posted to the account the previous month, May 3-June 2. Any purchase or payment posted after June 2 will appear on the July statement. The billing date remains the same each month. Payment is due on or before this date. While most companies allow 4-5 days after the due date to process payments, you do risk a finance charge if you pay past the due date.