Double cycle billing is a method used by some credit card companies to calculate interest by considering the current balance and the average daily balance from the previous billing period, potentially resulting in higher interest charges. Consumers can avoid this by not using credit cards with this billing strategy, paying balances in full each billing cycle, or keeping the average daily balance consistent.
Double cycle billing is a method used by some creditors to calculate the amount of interest that will be charged for a given billing cycle. The most common use of double cycle billing is by credit card companies. However, it is important to note that not all credit card providers use this method.
Sometimes called a two-cycle average daily balance, double-cycle billing involves considering not only the current credit card balance, but also the average daily balance from the previous billing period. What this credit card billing method can achieve is that it could be a higher number to use as the basis for calculating interest to be applied to the current cycle period. When this is the case, the consumer will pay more interest on the current outstanding balance on the card.
For people who carry credit card balances from one billing cycle to the next, this can lead to paying additional finance charges over the course of a year. This would be especially true for people who choose to pay the minimum payment each month, or even an amount that is slightly above the minimum due. From this perspective, double-loop billing directly benefits the card issuer, but could be seen as a penalty to the consumer for continuing to use the credit card and carrying a balance.
Basically, there are three ways to deal with using a double-loop calculation. First, the consumer can choose not to do business with credit card companies that use this billing strategy. All current credit accounts using double cycle billing must be paid off and accounts closed. Second, the consumer can choose to keep the account open, but pay the balance in full at the end of each billing cycle. In most cases, this will make the whole question of double-cycle billing irrelevant.
Finally, the consumer can ensure that the average daily balance from one month to the next is approximately the same amount. This will mean that even if double cycle billing is used, the average balance of two cycles will be almost identical to the current balance and result in little or no additional finance charges.
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