Credit Card Balance Computation Method

Balance Computation Method

The balance computation method is used to determine how interest on your account is calculated. There are a variety of methods. The most common method used is the Average Daily Balance.

 

To calculate this:

 

Balance x APR x # of days in the billing cycle

# of days in the calendar year

 

See if you can calculate Jerome’s Average Daily Balance. He has a balance of $200, an APR of 10 percent, and 30 days in the billing cycle. There are 365 days in the year. What is his Average Daily Balance?

 

200 x 0.10 x 30

365

=$1.64

Jerome’s Average Daily Balance is $1.64.

 

You can see how important it is to read all disclosures to make sure you understand the terms before you sign up for and accept a credit card offer.

 

 

 

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