Using the daily balance method to finance your credit card balance can be complicated and confusing, but you must know how to do it yourself so you can manage your money responsibly. Here’s How To Calculate Finance Charge with the daily balance method.
What Is Finance Charge?
Finance is one of two major components of a credit card bill, including interest and finance charges. A charge is also called finance or APR, and it’s a dollar amount calculated as a daily rate multiplied by your average daily balance. It represents charges that accrue while you carry Hyundai Finance debt on your card, but don’t pay it off each month. Calculating your actual finance will help you determine whether carrying debt would be worth it in any given month, and if so, how much debt you could safely take on. The easiest way How To Calculate Finance Charge is using what’s known as the daily balance method.
Once you know your exact average daily balance, use that number to Calculate Finance Charge using a little algebra. Divide 1 by your average daily balance and multiply that number by your periodic rate to find out how much you are paying in finance per day. For example, if you have an average daily balance of $1000 and a periodic rate of 19 you’ll pay $5 in charge for every day you owe $1000 on your credit card. Your total finance is simply adding up all those days.
Calculating Finance Charges At Different Times
In almost all cases, you’ll be able to Calculate Finance Charge at any time in the month. To do so, multiply your balance by two and then divide that number by how many days are left in your billing cycle. For example, if you had a $100 balance on a credit card with 28 days left in your billing cycle, you would multiply $100 by 2 and then divide that number by cents. The same process can be applied when you want to figure out your monthly finance charge. The easiest way to do so is to use your credit card bill and find your statement balance. Then, multiply that number by two and divide it by how many days are left in your billing cycle. If you’re paying off an entire month on that particular statement, then your monthly charge will be exactly what you calculate in this manner.
By using that daily rate, you can then apply it to your balance at any time during a statement cycle. For example, if you made an $800 payment on a credit card with a $2,500 balance and 35 days left in your billing cycle, you would multiply and then divide that number by 35 22 cents. That’s not too different from what we did before with our Finance Charge except now we’re calculating how much of that payment will go toward paying down our balance as opposed to interest charges.
How To Calculate A Credit Card’s Finance Charge?
The calculating charge can be done using one of two methods. There is a daily balance method, or there is an average daily balance method. The daily balance method sums up your Finance Charge for each day of the month. To do this calculation yourself, you need to know your exact credit card balance on each day of that month. If you pay off your full balance every month, then you’ll have no finance charges to worry about, but if not, then use these tips for paying down your credit card debt and eliminating those extra charges as soon as possible.
The average daily balance method adds up your balances on each day of a month and divides that by 30. It provides you with an average account balance to go by, giving you more room for error. Calculating Finance Charge using an average daily balance will give you a better idea of what your finance is likely to be once your statement cycle closes at month’s end. No matter which calculation method you use, try to pay off as much of your balance as possible before it’s due so that all you have to worry about is how much extra interest charges are on top of any minimum payment amount required. Doing so can save you hundreds or even thousands in finance charges over time!