Double cycle billing is a method used by some creditors to calculate the amount of interest to charge for a given billing cycle. The most common usage of double cycle billing is by credit card companies. However, it is important to note that not all credit card providers use this method.
Sometimes referred to as a two cycle average daily balance, double cycle billing involves considering not only the current balance on the credit card, but also the average daily balance from the previous billing period. What this method of credit card billing can accomplish is that it could a higher figure to use as the basis for the calculation of the interest that will be applied to the current period of cycle. When this is the case, the consumer will pay more interest on the current outstanding balance on the card.
For people who carry a balance on credit cards from one billing cycle to the next, this can lead to paying additional finance charges over the course of a year. This would be especially true for people who choose to pay the minimum payment each month, or even an amount that is slightly above the minimum due. From this perspective, the double cycle billing directly benefits the issuer of the card, but could be viewed as penalizing the consumer for continuing to use the credit card and maintaining a balance.
There are essentially three ways to deal with the use of a double cycle calculation. First, the consumer can choose to not do business with credit card companies that utilize this billing strategy. Any current credit accounts that employ double cycle billing should be paid off and the accounts closed. Second, the consumer can elect to keep the account open, but pay off the entire balance at the end of each billing cycle. In most cases, this will render the whole issue of double cycle billing irrelevant.
Lastly, the consumer can make sure that the average daily balance from one month to the next is roughly the same amount. This will mean that even if double cycle billing is used, the two cycle average balance will be almost identical to the current balance and result in little to no extra finance charges.