What is the adjusted balance method of calculating finance charges?
There are three ways credit card companies calculate finance charges. Of the three, the adjusted balance method will result in the lowest. When you make a payment on a credit card that uses the adjusted balance method, the company will simply subtract the amount of your payment from the balance at the beginning of the monthly billing cycle and charge you interest on the remainder. This results in lower finance charges than the average daily balance method, which bases finance charges on the average of the amount you owe each day, or the previous balance method, in which your payment won t be used to reduce the previous month s bill. All other things being equal, it s best to choose a credit card that uses the adjusted balance method to calculate your finance charges.
