How is the finance charge calculated?

The finance charge is the dollar amount you pay to use credit. The amount depends in part on your outstanding balance and the APR.

Credit card companies use one of several methods to calculate the outstanding balance. The method can make a big difference in the finance charge you’ll pay. Your outstanding balance may be calculated

	Over one billing cycle or two,
	Using the adjusted balance, the average daily balance, or the previous balance, and
	Including or excluding new purchases in the balance.

Depending on the balance you carry and the timing of your purchases and payments, you’ll usually have a lower finance charge with one-cycle billing and either

	The average daily balance method excluding new purchases,
	The adjusted balance method, or
	The previous balance method.