BANKING AFFAIRS

Detailed explanation-1: -The adjusted balance method subtracts payments and credits during this month from the balance at the end of the previous month. Purchases and fees made during the current month are not included in the adjusted balance.

Detailed explanation-2: -The term “previous balance method” describes one of many methods for calculating interest payments that are used by credit card companies. Under the previous balance method, the amount of interest charged each month is based on the balance of debt outstanding on the card as of the beginning of the previous month.

Detailed explanation-3: -Most credit cards calculate your interest charges using an average daily balance method, which means your interest is compounded and accumulates every day, based on a daily rate. In other words, every day your finance charges are based on the balance from the day before.

Detailed explanation-4: -Let’s say you had a credit card balance of $5, 000 at the end of the last billing cycle, and you made a payment of $1, 500 during the current billing cycle. The company would subtract this payment from the original credit card balance, giving you an adjusted balance of $3, 500.

Detailed explanation-5: -Calculating your monthly APR rate can be done in three steps: Step 1: Find your current APR and balance in your credit card statement. Step 2: Divide your current APR by 12 (for the twelve months of the year) to find your monthly periodic rate. Step 3: Multiply that number with the amount of your current balance.