Double-cycle Billing

Explanation: Double-cycle billing describes the credit card company practice of determining monthly finance charges by looking at your average balance over the last two billing cycles (i.e. 60 days) instead of the more common practice of considering the average balance of the current billing cycle (i.e. 30 days). This often results in consumers paying more in interest.

Example:
The formula used to calculate Finance Charges (FC) is:
FC= (Average Daily Balance * APR * Days in Billing Cycle) / Days in Year

Therefore, if your Average Daily Balance was $600 one month and $200 the next and your APR was 10%, your finance charge under a double-cycle billing system would be $3.28 ($400 * 10% * 30 /365). Under a single-cycle billing system, the Finance Charge would be roughly half that, $1.64 ($200 * 10% *30 /365).

Background: Because double-cycle billing is thought to put an unfair financial burden on consumers, it was outlawed by the Credit CARD Act of 2009. This regulation only applies to general-use consumer credit cards, however. Double-cycle billing is still legal when applied to business credit card accounts.

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