How Frequently are Finance Charges Calculated?
Finance charges are usually computed one of two ways: monthly, based on the month- end balance; or monthly, based on the average daily balance. If youre the type who carries a balance from month to month anyway, and the balance is roughly the same from day to day, then it wont make much difference which method is used. But, if you are the type who makes large purchases, and then quickly pays them off, you would be better off if your credit card issuer computes finance charges based on the end of period balance, rather than an average daily balance. Computing finance charges on an end of period balance, in this instance, would save you money. The frequency of compounding can also make a difference, in the amount of finance charges that are applied to your monthly bill. For the most part, credit card issuers compound the interest on a monthly basis. They take either the end of period balance, or the average daily balance, and then multiply by the monthly interest rate. The monthly rate e
