Comments on: Do You Know if Your Credit Card Uses The Dual-Cycle or Average Daily Balance Calculation?

By: Mark

Mark — Sat, 26 Apr 2008 06:24:28 +0000

Most of the time there will be a monthly statement charge and a per transaction fee. Some companies charge a startup fee while others do not. If you are looking for a service that includes a credit card processing terminal, be wary of so-called free offers.
Nice article ,so informative. Thanks

By: Jeremy

Jeremy — Wed, 04 Jul 2007 19:20:29 +0000

vans girl,

I’m not sure if this applies in the UK or not, sorry. And you don’t hear about the other method very often simply because they don’t want consumers to know. Fortunately a lot of finance sites over the past couple years have brought this method to public attention and a lot of companies have changed to the better ADB method.

So this shouldn’t apply to very many people today, this can come into play when you get into some of the rewards, cash back or 0% cards which could make the deal not quite as good as it appears if you don’t pay off the balance properly.

By: used vans girl

used vans girl — Wed, 04 Jul 2007 16:44:18 +0000

Why isn’t this information more readily available by the credit card companies? I’ve never heard of the Dual-Cycle or Average Daily Balance Calculation before. Will have to look online to find out which my credit card is as I never pay of the balance just a percentage. Does this also apply to credit cards in the UK?

By: fivecentnickel.com

fivecentnickel.com — Mon, 02 Jul 2007 04:03:28 +0000

Weekly Roundup – 06/29/07

Well, after two long days, we made it back into town safely. We covered 2900+ miles in 12 days, with the bulk of the driving packed into the first and last two days. We’re beat, but we had a great time and are glad to be back home. With that said…

By: What's happenin'? | Coddleshell

What's happenin'? | Coddleshell — Fri, 29 Jun 2007 13:42:13 +0000

[...] at Generation X Finance gives some good advice about knowing how your credit cards charge their interest, it’s definitely worth checking [...]

By: Kitty

Kitty — Thu, 28 Jun 2007 17:34:36 +0000

Well, if you always pay in full – why would anybody want to pay more than prevailing-CD-rate-adjusted-for-taxes on their money?- you couldn’t really care less.

The only exception are 0% offers. I am not clear how it will affect it though. Say you had an X amount at 0% which expires on 07/01 (for example). So on 06/25 you sent a check for the full balance amount. With dual-cycle calculation, can they still charge interest on this balance next month?

By: Midweek Money Links

Midweek Money Links — Wed, 27 Jun 2007 17:57:05 +0000

[...] Do You Know if Your Credit Card Uses The Dual-Cycle or Average Daily Balance Calculation? by Jeremy @ Generation X finance. Jeremy explains the difference between the two types of credit card balance calculations. I won’t be surprised to find many people not knowing about this. [...]

By: The Simple Dollar » The Simple Dollar Morning Roundup: Hunt For Boxes Edition

Tue, 26 Jun 2007 13:30:57 +0000

[...] Do You Know If Your Credit Card Uses The Dual-Cycle Or Average Daily Balance Calculation? This little question can make a huge difference in your credit card bills, especially over time. Jeremy lays it all out here. (@ generation x finance) [...]

By: BeyondtheConsumer

BeyondtheConsumer — Mon, 25 Jun 2007 19:03:57 +0000

I was not even aware of dual cycle and have not encountered it, thanks. Its good to know what to look out for!

By: Jeremy

Jeremy — Mon, 25 Jun 2007 18:25:59 +0000

That’s correct. For the sake of simplicity in the example I just used an existing balance from the start of a month with an immediate payment rather than placing a purchase and then subsequent payment within the same cycle.

But in your example, if you assume a 31 day billing cycle that ends at the end of the month you would essentially have 15 days with a $0 balance, 15 days with a $1,000 balance and one day with a $10 balance, for 31 total days.

The average daily balance would be: $15,000 + $10 / 31 = $484.19, and after applying the periodic rate you have a finance charge of about $6.

But if you left that $10 balance carry over into the next cycle and made no additional purchases in June you finance charge would be 13 cents. But with the same activity on a dual-cycle system they would also go back and look at the previous statement balance, which could be something much larger than $10 depending on when payments were sent, etc.

So thanks for clarifying, it does become more complicated when you factor in when payments were made, if there were additional purchases and when they were made, and it is also worth noting that some companies will treat new purchases differently. Some may include them and others may not.

This was more or less the optimal example to show how much of an impact it can make, but real world examples will vary greatly.