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Credit card companies use one of several methods to calculate the outstanding balance. The
method can make a big difference in the finance charge you’ll pay. Your outstanding balance
may be calculated
Over one billing cycle or two,
Using the adjusted balance, the average daily balance, or the previous balance, and
Including or excluding new purchases in the balance.
Depending on the balance you carry and the timing of your purchases and payments, you’ll
usually have a lower finance charge with one-cycle billing and either
The average daily balance method excluding new purchases,
The adjusted balance method, or
The previous balance method.
Minimum finance charge
Some credit cards have a minimum finance charge. You’ll be charged that minimum even if
the calculated amount of your finance charge is less. For example, your finance charge may
be calculated to be 35¡--but if the company’s minimum finance charge is $1.00, you’ll pay
$1.00. A minimum finance charge usually applies only when you must pay a finance charge--
that is, when you carry over a balance from one billing cycle to the next.
What are the fees?
Most credit cards charge fees under certain circumstances:
Annual fee (sometimes billed monthly). Charged for having the card
Cash advance fee. Charged when you use the card for a cash advance; may be a flat fee
(for example, $3.00) or a percentage of the cash advance (for example, 3%)
Balance-transfer fee. Charged when you transfer a balance from another credit card
(Your credit card company may send you Ðchecks“ to pay off the other card. The
balance is transferred when you use one of these checks to pay the amount due on the
other card.)
Late-payment fee. Charged if your payment is received after the due date