What Is 3 Cycle Billing?

The term 3 cycle billing shall not be common knowledge to all credit card users, but it is a concept that everyone should be aware of. Some issuers have been moving distant from the average daily billing cycle and changing over to 3 cycle method of calculating the interest earned on balances. 3 cycle billing does not greatly affect users that tend the carry a balance, but it does subsequently affect cardholders that pay there balance off monthly. Sequential to understand 3 cycle billing you should first understand the average daily billing method, which shall now be explained. Let us speak that you own a credit card with a 15% interest rate and your billing cycle for the month of April runs from the 1st through the 30th regarding the month.

At the beginning regarding the month you have knowledge of a balance of $0 on the card. Now, on the 10th of April you make an optain of $1000, which means you can be going to carry that balance for 20 days until the current billing cycle ends. You should now calculate the average daily balance for the month of April. To do so you should first multiply the balance regarding the card by the many days the balance was carried $1000 20 days = 20,000, then you can divide that no. by the total days within the billing cycle 20,000 30 = 666.

You have knowledge of now figured out that your average daily balance for April should be $666. If this card uses the average daily billing cycle and you started the month with a $0 balance, there should be no interest charged as long as the April balance is paid off in full. This billing cycle essentially sends you a grace period on purchases as long as the balance is paid off in full each month. But, if this credit card uses the 3 cycle billing method, you should be charged interest for the month of April when you receive your bill in Shall due to the fact that your average daily balance is based on the final 3 billing cycles. So, when you receive your bill for May, you can hold a finance charge that is due, even though your balance was paid off in full for April and you did not make any purchases together with the card in May.

Sequential to figure out how many your interest should be, you can take the average daily balance many days within the billing cycle periodic interest rate. Below are the calculations to figure out your interest due in May. Average daily balance 1000 20 61 = 327. 87 Many days in billing cycle 30 + 31 = 61 Periodic interest rate 15 365 =. 0411 Finance charge for Shall 327.

22 Based on the interest rate of 15% stated above, you can receive a bill in Shall that shows a finance charge of $8. 22 even though the balance was paid in full in April. As you can now see, the 3 cycle billing method of calculating interest is not necessary for users that decide to pay there balance of in full each month. Essentially, a 3 cycle billing card shall begin charging interest from the day the purchases is made, which shall eliminate the grace period that is provided by a card that uses the average daily billing method. As you can now see, the 3 cycle billing method of calculating interest should mainly effect users that always pay their balance off in full due to the fact that they shall still be paying interest on purchases even when there is no balance being carried over on the card.

So, next time you can be seeing for an special credit card make sure you look at the fine print to confirm for what kind of billing method they use for that card.