What is Two-Cycle Credit Card Billing?
Author: Alaskan Assassin
Posted: Tue Sep 26, 2006 1:52 pm
Post subject: TWO-CYCLE AVERAGE DAILY BALANCE?????
WHAT KIND OF BILLING IS THIS IM CONFUSED?
CardRatings.com is the most comprehensive source for comparing credit card offers. Please visit CardRatings.com to view the best rated credit cards!
Author: Evilbunny
Posted: Tue Sep 26, 2006 2:19 pm
Post subject: Do you really want to know? lol
You should familiarize yourself with these two terms: non-revolving and revolving.
Non-revolving:
There is no balance, which has carried over from a previous billing cycle (i.e., the Cardmember paid the account in full).
Revolving:
The Cardmember has not paid a previous month's balance in full, and so part (or all) of that balance has carried into the current billing cycle.
Whenever a Cardmember goes from a state of not revolving to a state of revolving, finance charges from the previous billing cycle are recaptured and added to the finance charges assessed for the current billing cycle. Two-cycle billing accrues interest on the previous cycle's average daily balance and the current cycle's average daily balance.
We only use two-cycle billing in two circumstances:
If an account goes from a $0 balance to a revolving balance.
If an account goes from paid in full (PIF) to revolving.
Why We Recapture:
The reason that we recapture finance charges from the previous cycle is simple: the balance from this cycle is the balance, which carried (in part or full) into the current billing cycle. Essentially, it is the balance from this previous cycle, which caused the Cardmember to revolve. Therefore, the debt started back in this cycle, so it is fair that interest should be retroactive to the beginning of the debt.
This only happens when the account goes from non-revolving to revolving. If the Cardmember continues to revolve the balance, then there is no need to go back and recapture any finance charges, so the finance charges on consecutive statements are only those incurred during that cycle.
Essentially, it can be thought of in the following terms:
When the Cardmember elects to revolve the balance (i.e., not pay in full), the grace period for the account is forfeited so that interest accrues from the original date of purchase (the transaction date).
Because the grace period is forfeited, we must go back and find out how much interest should have been assessed on the previous statement. We calculate the average daily balance for merchandise during this previous billing cycle, and call this our PREV MDSE. (Because a cash balance has no grace period, we do not need to find the ADB for cash; it would have already been assessed.)
We must also calculate how much interest should be charged for the current billing period. We calculate the ADB's for this period: ADB MERCH and ADB CASH.
Once we have all the ADB's, we perform our finance charge calculations, sum the finance charges on each separate ADB, and add the Total Finance Charge to the Cardmember's balance.
CardRatings.com is the most comprehensive source for comparing credit card offers. Please visit CardRatings.com to view the best rated credit cards!
Posted: Tue Sep 26, 2006 1:52 pm
Post subject: TWO-CYCLE AVERAGE DAILY BALANCE?????
WHAT KIND OF BILLING IS THIS IM CONFUSED?
CardRatings.com is the most comprehensive source for comparing credit card offers. Please visit CardRatings.com to view the best rated credit cards!
Author: Evilbunny
Posted: Tue Sep 26, 2006 2:19 pm
Post subject: Do you really want to know? lol
You should familiarize yourself with these two terms: non-revolving and revolving.
Non-revolving:
There is no balance, which has carried over from a previous billing cycle (i.e., the Cardmember paid the account in full).
Revolving:
The Cardmember has not paid a previous month's balance in full, and so part (or all) of that balance has carried into the current billing cycle.
Whenever a Cardmember goes from a state of not revolving to a state of revolving, finance charges from the previous billing cycle are recaptured and added to the finance charges assessed for the current billing cycle. Two-cycle billing accrues interest on the previous cycle's average daily balance and the current cycle's average daily balance.
We only use two-cycle billing in two circumstances:
If an account goes from a $0 balance to a revolving balance.
If an account goes from paid in full (PIF) to revolving.
Why We Recapture:
The reason that we recapture finance charges from the previous cycle is simple: the balance from this cycle is the balance, which carried (in part or full) into the current billing cycle. Essentially, it is the balance from this previous cycle, which caused the Cardmember to revolve. Therefore, the debt started back in this cycle, so it is fair that interest should be retroactive to the beginning of the debt.
This only happens when the account goes from non-revolving to revolving. If the Cardmember continues to revolve the balance, then there is no need to go back and recapture any finance charges, so the finance charges on consecutive statements are only those incurred during that cycle.
Essentially, it can be thought of in the following terms:
When the Cardmember elects to revolve the balance (i.e., not pay in full), the grace period for the account is forfeited so that interest accrues from the original date of purchase (the transaction date).
Because the grace period is forfeited, we must go back and find out how much interest should have been assessed on the previous statement. We calculate the average daily balance for merchandise during this previous billing cycle, and call this our PREV MDSE. (Because a cash balance has no grace period, we do not need to find the ADB for cash; it would have already been assessed.)
We must also calculate how much interest should be charged for the current billing period. We calculate the ADB's for this period: ADB MERCH and ADB CASH.
Once we have all the ADB's, we perform our finance charge calculations, sum the finance charges on each separate ADB, and add the Total Finance Charge to the Cardmember's balance.
CardRatings.com is the most comprehensive source for comparing credit card offers. Please visit CardRatings.com to view the best rated credit cards!
posted by CardRatings.com at 10:29 PM
0 Comments:
Post a Comment
<< Home