- A method used by some card issuers where they base their finance charges on the amount owed at the end of the previous billing cycle.
last month's balance, previous billing cycle, previous credit card balance
Related Terms and Acronyms
- Adjusted Balance — Definition,
- A method used by some card issuers in which they subtract all payments made during the month, then add the finance charges.
- Average Daily Balance (ADB) — Acronym, Important,
- This is the method by which most credit cards calculate your payment due. An average daily balance is determined by adding each day's balance and then dividing that total by the number of days in a billing cycle. The average daily balance is then multiplied by a card's monthly periodic rate, which is calculated by dividing the annual percentage rate by 12.
- Billing Cycle — Definition,
- The number of days between the last statement date and the current statement date.
- Billing Statement — Definition,
- A monthly bill that is sent by a creditor to the customer that provides a summary of the activity on an account. This can include balances, purchases, payments, credits, and finance charges.
- Card Holder Agreement — Definition,
- A written agreement or contract between a credit card holder and the credit issuer that details the terms and conditions of a credit card account. This agreement must include the Annual Percentage Rate, the monthly minimum payment formula, the annual fee if applicable, and the cardholder's rights in billing disputes. Changes to the agreement can be made at any time by the issuer with prior written notice.
- Credit Card (CC) — Acronym, Very Important,
➥ A payment card that gives customers access to a revolving line of credit.
- A plastic card with a coded magnetic stripe that, when signed, entitles its bearer to a revolving line of credit, with a credit limit and interest rate determined by the borrower's income and credit report.
- Grace Period — Definition,
- If the credit card user does not carry a balance, the grace period is the interest-free time a lender allows between the transaction date and the billing date. The standard grace period is usually between 20 and 30 days. If there is no grace period, finance charges will accrue the moment a purchase is made with the credit card. People who carry a balance on their credit cards have no grace period.
- A window of time where a policyholder still has time to pay insurance premiums.
- Zero Balance — Definition,
- What shows on a credit card customer's bill when the outstanding balance has been paid and no new charges have been incurred during the billing cycle.