Credit Card Finance Charges

Average daily balance is one of the ways your creditor might calculate your finance charge. Find out how the calculation works.

The daily balance method of calculating finance charges uses the actual balance each day in the billing cycle.

The previous balance method of calculating your finance charge uses the balance at the beginning of your billing cycle.

The ending balance method of calculating your finance charge uses the balance at the end of the billing cycle.

The adjusted balance method of calculating your finance charge uses your previous balance less any payments and credits made during the billing cycle.

Finance charges are applied to credit card balances that aren't paid before the grace period. Different credit cards calculate finance charges in different ways. Here are six ways finance charges can be calculated.

A finance charge is the fee you pay for carrying a balance on your credit card. Learn how you can avoid paying credit card finance charges.

There are generally two ways to avoid paying interest on your credit card. You can avoid paying interest if you pay the balance in full at the end of the month or if you have a zero percent interest rate promotion.

The average daily balance formula first averages your credit card balance each day of your billing cycle, then multiplies by your APR to come up with the finance charge.

Explains the double billing cycle method of computing finance charges and demonstrates how it can be more costly for cardholders who want to pay their balance off quickly.

Use this calculator to figure out the monthly finance charge on a balance. All you need to know is the balance and the APR. Make sure you enter the APR as a decimal. For example, enter .14 for a 14% APR.

Knowing how to calculate your own finance charge can come in handy, for example, if you want to know what fee to expect for carrying a credit card balance.