March 18, 2018
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Credit Card Tricks of the Trade: Two-Cycle Billing

We all expect the companies we deal with to be professional, reasonably priced, and pleasant. It’s not too much to ask for when you think about it. However, when it comes to the credit card industry, we have come to accept the mediocre to actually substandard business practices. Some of us even expect it! You may believe the higher interest rates and fees are your fault because your credit history and credit score aren’t perfect. While reasonable interest rates, certain fees, and other policies may be justifiable—after all, the credit companies are the ones taking on the financial risk—many are excessive and go way beyond what most consumers would call fair business practices. One good example is two-cycle billing.

Two-Cycle Billing
Two-cycle billing is a method used by the
credit card industry to make more profits, via interest charges. Many card issuers use the standard one-month billing cycle to calculate interest charges, but some actually calculate the interest on the previous two months’ balances. Essentially, it wipes out the grace period for new purchases for customers who carry a balance. Unless you pay off your balance two months in a row, the two-cycle billing method will include the previous cycle’s average balance for calculating the finance charges, even if you paid off that cycle’s balance in full. It can be confusing, but the bottom line is that you end up paying more because they use the average daily balance over the last two billing periods, instead of one.

What you can do

Being knowledgeable about this is the first step in order to combat it. When considering a new credit card, read the terms and conditions thoroughly, especially the section on how interest rates are calculated so you will know whether they employ two-cycle billing or one. Considering how competitive the credit card companies are and how saturated the market is with offers, it pays to shop around for a better card.





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