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What is double-cycle billing on credit cards?

By , CardRatings contributor
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Question:  What is double-cycle billing on credit cards?

Answer:  Double-cycle billing is also referred to as two-cycle billing. It's a method that calculates interest charges based on the last two billing cycles instead of on just the last billing cycle. The result is that consumers who occasionally carry revolving balances get penalized.

Here's an example of how it works: Let's say your billing cycle is from June 1-June 30. Your balance on June 1 was zero. You made a $500 purchase on June 10th. You had no other purchases that month so your average daily balance is $333.33 (500 x 20=1000 �� 30; your $500 purchase is multiplied by 20 because that's the number of days you carried the $500 balance). Using the single billing cycle method, since you started with a zero balance, you wouldn't be charged any interest if you paid the $500 when your bill arrived. With double-cycle billing, your average daily balance is calculated using the last two billing cycles. So you'd pay interest on the $500 for the remaining 20 days after your purchase.

The extra interest you'd pay depends on your interest rate and balance. But if you make a large purchase, the charges can become significant. The part of the Credit CARD Act that became effective on February 22, 2010, banned double-cycle billing.

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