What is “Double-Cycle Billing” practice used by credit card companies?

Randy Shoemaker
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May 18, 2009 by Randy Shoemaker
Category: Personal Finance

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Bogie Boric
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Advisor: Bogie Boric, Tax Planning
May 20, 2009  
Short answers is – the way credit card companies can make you pay more in finance charges.

Double-cycle billing is calculated based on average daily balance of your current and previous billing cycles. If you have unpaid balances in affect you are being charged interest on debt that has already been paid.

Here is an simple (and obvious ) example:

Imagine a cardholder who starts a billing cycle with zero balance, charges $1,000 on his or her credit card (on the 10th of the month) and makes a payment of $990 (on the first day of the next billing cycle). Balance of $10 is carried over to next month.

Under single-cycle billing, cardholder would be charged interest on the remaining balance of $10 (average daily balance).

Under double-cycle billing, cardholder would be charged interest on the full $1,000 from the previous month (Cycle 1) as well as, remaining balance of $10 (Cycle 2) or an average daily balance of $338.33. Again, you are being charged interest on debt that has already been paid.

If APR is 13.2%, periodic interest charges would be:



Single-cycle interest – $10 * 30 days * 0.0361643% (13.2/365) = $0.11


Double-cycle interest – $338.33 * 30 days * 0.0361643% (13.2/365) = $3.67



This practice, as well as “Universal Default” are two practices that over half of credit card companies are using (and abusing).