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How and how often your credit card calculates your interest makes a big difference. Know what you are getting before you sign up.
- Average Daily Balance This is the most
common calculation method. Each morning in the billing period,
your balance is credited with any payments or refunds. Under
some plans, any new purchases are also added. At the end
of the billing cycle, daily balances are added and divided
by the number of days in the billing period to get the "average
daily balance."
- Adjusted Balance This is an advantageous
method for cardholders. Payments or credits received during
the current billing period are subtracted from the balance
at the end of the previous billing period. Purchases made
during the billing period aren't included. This method gives
you until the end of the billing cycle to pay and avoid
the interest charges.
- Two-Cycle Balance The average daily
balance is calculated from two billing cycles rather than
one, and finance charges are higher. The grace period for
customers who carry a balance is wiped out. If the bill
is not paid in full at the first billing, interest becomes
retroactive back to the purchase date.
Reducing Your Interest Rate
It is possible to qualify for a lower interest rate on your credit cards, the bank won't automatically inform you of this. Call the customer service line to ask if you qualify for a lower rate. If you have been paying at least the minimum balance due on your bills every month, your credit with the bank might qualify for a reduction.
Many credit cards solicit new customers by offering low
introductory (or Teaser
Rates) The credit card company will not remind you that
the introductory rate period has ended, and you may be charged
a significant additional fee to transfer your balances from
your other credit cards.
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