Investopedia

Continue to Site »

Previous Balance Method

Filed Under » ,
Dictionary Says

Definition of 'Previous Balance Method'

A credit card accounting method where interest charges are based on the amount owed at the end of the beginning of the billing cycle. The previous balance method charges interest based on the amount of debt the consumer carries over from the previous billing cycle to the new billing cycle. The cardholder's APR is divided by 12 to determine the monthly interest rate, and the previous balance is multiplied by the monthly interest rate to get the finance charge for the current billing cycle. This method can be more expensive for consumers who are in the process of paying down debt, because payments don't immediately reduce the amount of interest owed.
Investopedia Says

Investopedia explains 'Previous Balance Method'

The interest you owe when you carry a credit card balance can be calculated in different ways and can vary from card to card. The cardholder agreement will state the method your credit card company uses to calculate how much interest is owed. The most common methods are the previous balance method, the daily balance method, the average daily balance method, the adjusted balance method and the ending balance method. If you carry credit card debt, you should choose a card with both a low APR and a favorable method of calculating interest based on your pattern of making purchases and payments.

Articles Of Interest

  1.

    Take Control Of Your Credit Cards

    The plastic in your wallet doesn't have to hurt your finances. Learn how to manage it responsibly.

  2. The Importance Of Your Credit Rating

    A great starting point for learning what a credit score is, how it is calculated and why it is so important.

  3. Credit, Debit And Charge: Sizing Up The Cards In Your Wallet

    Not all plastic is equal! Learn the difference between the three kinds, and how each can affect your finances.

  4. How Credit Cards Affect Your Credit Rating

    The average American household has four cards, but does that mean more is better?

  5. Understanding Credit Card Interest

    Paying these rates can impact your disposable income and your investment returns.

  6. Digging Out Of Personal Debt

    Find out why good intentions can put consumers in an even bigger hole than before.

  7. Depreciation: Straight-Line Vs. Double-Declining Methods

    Appreciate the different methods used to describe how book value is "used up".

  8. What's On A Consumer Credit Report?

    A look at the various components and considerations that go into one's credit report and credit score.

  9. 7 Unconventional Ways Businesses Can Borrow Money

    Find out how your business can get the money it needs - even when the bank says "no".

  10. Financial Statement: Extraordinary Vs. Nonrecurring Items

    When it comes to analyzing a company, successful analysts spend considerable time differentiating between accounting items that are likely to recur going forward from those that most likely will ...
comments powered by Disqus
Marketplace
Hot Definitions

  1. Validation Period

    The amount of time necessary for the premium on an insurance policy to cover the commissions, the cost of investigation, medical exams and other expenses associated with the issuance of the policy.

  2. Winner's Curse

    Because of incomplete information, emotions or any other number of factors regarding the item being auctioned, bidders can have a difficult time determining the item's intrinsic value. As a result, the largest overestimation of an item's value ends up winning the auction.

  3. Glocalization

    A combination of the words "globalization" and "localization" used to describe a product or service that is developed and distributed globally, but is also fashioned to accommodate the user or consumer in a local market.

  4. Disaster Loss

    A special type of tax-deductible loss, similar to a casualty loss, where a loss has been incurred by taxpayers who reside in an area that has been designated as a federal disaster area by the President.

  5. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.

  6. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.
Trading Center