I've noticed with some credit card companies like Discover and First Usa, they use two-cycle billing. What is it? Does it cost you more in interest charges or less?
I believe Discover Card invented it. Yes, it does cost you more. Basically if you buy something today, and don't pay it completely off when you get your bill at the end of the month, interest charges would then be applied going back to today (i.e. no grace period). With one-cycle billing, you would still get the grace period, because interest charges would start later.
I just edited the bejeezus out of my message, because I was wrong. The previous poster summed it up really well. Here's another link from Bankrate.com that also gives an alternate explanation: http://www.bankrate.com/brm/news/DrDon/Dr.Don_20000802.asp Doc
Two Cycle Billing is when the average Daily balance is calculated from Two Cycles instead of one. Finance Charges are typically higher than a single cycle. Using a two cycle , wipes out your Grace period for people who carry a balance . If the bill is not paid at the first billing interest becomes retroactive to the first purchase date.. Most Companies use Single Cycle billing
No, it's giving you twice the shaft once a month. Basically, when they calculate how much you owe them they look back at the average balance in the last TWO months instead of one month. If you are paying down your balance, this shafts you because you still pay on balances a month after you paid it. This is really noticable when you completely pay off the balance because you will get interest charges the next month. However, if you are increasing your balance every month it works out to your advantage. So credit card companies like it because it rewards you for charging more on their card, but penalizes you for paying it off. Also, it makes it much harder to get a grace period once you start carrying a balance.
