Comments on: How Two-Cycle Billing Works http://allfinancialmatters.com/2006/12/12/how-two-cycle-billing-works/ A personal finance blog dedicated to discussing such topics as budgeting, asset allocation, 401K, IRA, cash flow, insurance, financial planning, portfolio management, and other areas in personal finance. Fri, 20 Nov 2009 19:56:44 -0800 http://wordpress.org/?v=abc hourly 1 By: Four Different Balance Computation Methods to Understand | Credit Card Assist Blog http://allfinancialmatters.com/2006/12/12/how-two-cycle-billing-works/comment-page-1/#comment-439392 Four Different Balance Computation Methods to Understand | Credit Card Assist Blog Sun, 20 Sep 2009 07:06:32 +0000 http://allfinancialmatters.com/?p=1424#comment-439392 [...] There are a whole variety of different balance computation methods that use information from two billing cycles (the current one and the one previous to it) to determine what the balance is that interest is [...] [...] There are a whole variety of different balance computation methods that use information from two billing cycles (the current one and the one previous to it) to determine what the balance is that interest is [...]

]]> By: A Small Mistake: My Introduction to Two-Cycle Billing | Follow My Money - Financial Advicer, Money Management, Debt Free Tips http://allfinancialmatters.com/2006/12/12/how-two-cycle-billing-works/comment-page-1/#comment-435201 A Small Mistake: My Introduction to Two-Cycle Billing | Follow My Money - Financial Advicer, Money Management, Debt Free Tips Tue, 18 Aug 2009 22:00:16 +0000 http://allfinancialmatters.com/?p=1424#comment-435201 [...] So now I have first-hand experience with two-cycle billing. There’s a reason it’s called two-cycle billing. You’re charged interest over two billing cycles. The month after you pay off your credit card balance, you still owe a finance charge. You’re only free of finance charges after you’ve paid the balance in full for two consecutive months. (For more info, check out JLP’s article on how two-cycle billing works.) [...] [...] So now I have first-hand experience with two-cycle billing. There’s a reason it’s called two-cycle billing. You’re charged interest over two billing cycles. The month after you pay off your credit card balance, you still owe a finance charge. You’re only free of finance charges after you’ve paid the balance in full for two consecutive months. (For more info, check out JLP’s article on how two-cycle billing works.) [...]

]]> By: A Small Mistake: My Introduction to Two-Cycle Billing | Debt, Credit Card & Consolidation Current News Digest http://allfinancialmatters.com/2006/12/12/how-two-cycle-billing-works/comment-page-1/#comment-435113 A Small Mistake: My Introduction to Two-Cycle Billing | Debt, Credit Card & Consolidation Current News Digest Tue, 18 Aug 2009 15:20:22 +0000 http://allfinancialmatters.com/?p=1424#comment-435113 [...] So now I have first-hand experience with two-cycle billing. There’s a reason it’s called two-cycle billing. You’re charged interest over two billing cycles. The month after you pay off your credit card balance, you still owe a finance charge. You’re only free of finance charges after you’ve paid the balance in full for two consecutive months. (For more info, check out JLP’s article on how two-cycle billing works.) [...] [...] So now I have first-hand experience with two-cycle billing. There’s a reason it’s called two-cycle billing. You’re charged interest over two billing cycles. The month after you pay off your credit card balance, you still owe a finance charge. You’re only free of finance charges after you’ve paid the balance in full for two consecutive months. (For more info, check out JLP’s article on how two-cycle billing works.) [...]

]]> By: A Small Mistake: My Introduction to Two-Cycle Billing http://allfinancialmatters.com/2006/12/12/how-two-cycle-billing-works/comment-page-1/#comment-435098 A Small Mistake: My Introduction to Two-Cycle Billing Tue, 18 Aug 2009 13:38:16 +0000 http://allfinancialmatters.com/?p=1424#comment-435098 [...] So now I have first-hand experience with two-cycle billing. There’s a reason it’s called two-cycle billing. You’re charged interest over two billing cycles. The month after you pay off your credit card balance, you still owe a finance charge. You’re only free of finance charges after you’ve paid the balance in full for two consecutive months. (For more info, check out JLP’s article on how two-cycle billing works.) [...] [...] So now I have first-hand experience with two-cycle billing. There’s a reason it’s called two-cycle billing. You’re charged interest over two billing cycles. The month after you pay off your credit card balance, you still owe a finance charge. You’re only free of finance charges after you’ve paid the balance in full for two consecutive months. (For more info, check out JLP’s article on how two-cycle billing works.) [...]

]]> By: Reader Mailbag #73 | Rich Dad Poor Dad Blog http://allfinancialmatters.com/2006/12/12/how-two-cycle-billing-works/comment-page-1/#comment-432061 Reader Mailbag #73 | Rich Dad Poor Dad Blog Tue, 28 Jul 2009 10:44:51 +0000 http://allfinancialmatters.com/?p=1424#comment-432061 [...] your credit card company uses two-cycle billing, which pretty much acts exactly how you describe. There’s a great description of it over at All Financial Matters, but what it essentially means is that the credit card company uses an average of your balances [...] [...] your credit card company uses two-cycle billing, which pretty much acts exactly how you describe. There’s a great description of it over at All Financial Matters, but what it essentially means is that the credit card company uses an average of your balances [...]

]]> By: Reader Mailbag #73 | Design Website Blog http://allfinancialmatters.com/2006/12/12/how-two-cycle-billing-works/comment-page-1/#comment-431954 Reader Mailbag #73 | Design Website Blog Mon, 27 Jul 2009 14:05:44 +0000 http://allfinancialmatters.com/?p=1424#comment-431954 [...] your credit card company uses two-cycle billing, which pretty much acts exactly how you describe. There’s a great description of it over at All Financial Matters, but what it essentially means is that the credit card company uses an average of your balances [...] [...] your credit card company uses two-cycle billing, which pretty much acts exactly how you describe. There’s a great description of it over at All Financial Matters, but what it essentially means is that the credit card company uses an average of your balances [...]

]]> By: The Simple Dollar » Reader Mailbag #73 http://allfinancialmatters.com/2006/12/12/how-two-cycle-billing-works/comment-page-1/#comment-431948 The Simple Dollar » Reader Mailbag #73 Mon, 27 Jul 2009 14:01:17 +0000 http://allfinancialmatters.com/?p=1424#comment-431948 [...] your credit card company uses two-cycle billing, which pretty much acts exactly how you describe. There’s a great description of it over at All Financial Matters, but what it essentially means is that the credit card company uses an average of your balances [...] [...] your credit card company uses two-cycle billing, which pretty much acts exactly how you describe. There’s a great description of it over at All Financial Matters, but what it essentially means is that the credit card company uses an average of your balances [...]

]]> By: Vito Caputo http://allfinancialmatters.com/2006/12/12/how-two-cycle-billing-works/comment-page-1/#comment-429775 Vito Caputo Sat, 11 Jul 2009 21:22:28 +0000 http://allfinancialmatters.com/?p=1424#comment-429775 Your entire example is wrong. In your August example... besides the obvious error of the AverageDailyBalance being lower than any single day balance... you've omitted a small (but significant) charge. Unknown to most people... credit card interest is compounded daily. On your statement... under "How we calculate..." it actually says this WITHOUT using the word COMPOUNDED. Incredibly clever! "Your daily balance is calculated by taking the previous day's balance, adding any new charges and subtracting any payments posted." Most people don't realize that "...adding any new charges" is not limited to new purchases. The daily interest on yesterday's balance is a "new charge"... and tomorrow, you'll be charged interest on the interest added yesterday. Consequently... if on Day_1 you have a balance of X... on Day_2 your balance will be greater than X. Without any new purchases... until a payment is recorded... your balance will increase EVERY day. From your August example... with interest compounded daily... 30830.12 - Sum of Daily Balances 994.52 - Average Daily Balance 15.20 - Interest added Without daily compounding... 30600.00 - Sum of Daily Balances 987.10 - Average Daily Balance 15.09 - Interest added The significance of this comes into play when you time your payments to be close to their due date. With the ability to pay online... you can save a significant amount of money (and shorten the pay-down period). Make your payment on the first day after your closing date. If the timing is wrong and funds are not available to do this... request that your closing date be changed to a date that will allow you to take advantage of the strategy. Your savings won't make you rich but... like my Mother said... "Better in your pocket than in their pocket." Your entire example is wrong. In your August example… besides the obvious error of the AverageDailyBalance being lower than any single day balance… you’ve omitted a small (but significant) charge.

Unknown to most people… credit card interest is compounded daily. On your statement… under “How we calculate…” it actually says this WITHOUT using the word COMPOUNDED. Incredibly clever!

“Your daily balance is calculated by taking the previous day’s balance, adding any new charges and subtracting any payments posted.”

Most people don’t realize that “…adding any new charges” is not limited to new purchases. The daily interest on yesterday’s balance is a “new charge”… and tomorrow, you’ll be charged interest on the interest added yesterday.

Consequently… if on Day_1 you have a balance of X… on Day_2 your balance will be greater than X. Without any new purchases… until a payment is recorded… your balance will increase EVERY day.

From your August example… with interest compounded daily…

30830.12 – Sum of Daily Balances
994.52 – Average Daily Balance
15.20 – Interest added

Without daily compounding…

30600.00 – Sum of Daily Balances
987.10 – Average Daily Balance
15.09 – Interest added

The significance of this comes into play when you time your payments to be close to their due date.

With the ability to pay online… you can save a significant amount of money (and shorten the pay-down period).

Make your payment on the first day after your closing date.

If the timing is wrong and funds are not available to do this… request that your closing date be changed to a date that will allow you to take advantage of the strategy.

Your savings won’t make you rich but… like my Mother said… “Better in your pocket than in their pocket.”

]]> By: double cycle billing http://allfinancialmatters.com/2006/12/12/how-two-cycle-billing-works/comment-page-1/#comment-417986 double cycle billing Thu, 30 Apr 2009 22:13:18 +0000 http://allfinancialmatters.com/?p=1424#comment-417986 [...] [2] Two-Cycle Billing Costs More | Just Ask Asa Aarons [3] What is Double Cycle Billing? [4] How Two-Cycle Billing Works | AllFinancialMatters [5] Chase ends double-cycle billing [6] Double Cycle Billing Articles from ArticlesBase.com [7] [...] [...] [2] Two-Cycle Billing Costs More | Just Ask Asa Aarons [3] What is Double Cycle Billing? [4] How Two-Cycle Billing Works | AllFinancialMatters [5] Chase ends double-cycle billing [6] Double Cycle Billing Articles from ArticlesBase.com [7] [...]

]]> By: Richard Penn http://allfinancialmatters.com/2006/12/12/how-two-cycle-billing-works/comment-page-1/#comment-417444 Richard Penn Tue, 28 Apr 2009 16:00:56 +0000 http://allfinancialmatters.com/?p=1424#comment-417444 Dear Sir: Your 2nd August table from the top has an incorrect ave. daily balance. Your average amount is below the lowest balance for the month. It would seem to me that it should be the same ave. daily balance you computed in the top most August table = $987.10. Dear Sir:
Your 2nd August table from the top has an incorrect ave. daily balance. Your average amount is below the lowest balance for the month. It would seem to me that it should be the same ave. daily balance you computed in the top most August table = $987.10.

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