Two-Cycle Billing Vs. One-Cycle Billing
Although credit cards are helpful to bridge gaps in small-business income, the interest charged should be an important factor in deciding when to use the card. Two-cycle billing, also known as double-cycle billing, refers to a practice by credit card companies that calculates the amount a cardholder owes based on the average daily balance for the past two months. This is different from once-cycle billing, which only takes the current month's average daily balance into account.
For one-cycle billing, the card company adds the daily ending balances and divides the resulting figure by the number of days in the month. The company then multiplies that number by the interest rate to get the balance owed. Two-cycle billing adds the current month's daily balances together with the previous month's daily balances and divides by the number of days in the two months.
急速PC28彩票One-cycle billing only charges interest on the current month's balance. However, because two-cycle billing uses the average daily balance of two months, it can cause some cardholders to pay double interest on older balances. Cardholders who carry a nonfluctuating balance from month to month are not as heavily effected by two-cycle billing because the amount of interest stays the same each month. However, cardholders who carry occasional balances but pay them off within a few months may end up paying additional interest on older portions of the balance that were paid before the billing cycle ended.
Card companies that utilize one-cycle billing often provide a grace period to cardholders who pay off their balances completely each month. During the grace period, the card company will not charge interest on the balance. This period of time usually lasts from the day the purchase was made to the day the bill is due. Two-cycle billing does not allow for a grace period because interest starts accruing on the day of the purchase.
The Credit Card Accountability, Responsibility and Disclosure Act ended two-cycle billing in 2009 by banning the practice of calculating credit card interest and payments by using the average balances of the previous and current months. United States law now requires all credit card companies to base finance charges on the current month only. If a card company utilizes two-cycle billing, it can incur fines and possible criminal charges.
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