What Is the Adjusted Balance Method?

The adjusted balance method is an accounting method that bases finance charges on the amount(s) owed at🐷 the end of the current billing cycle after credits🌳 and payments post to the account.

How the Adjusted Balance Method Works

The adjusted balance method is used to calculate the interest owed for most 澳洲幸运5官方开奖结果体彩网:savings accounts as well as by some credit card issuers. Using the adju🌃sted balance method, the interest earned in a savings account is calculated at the end of the month after all the transactions (including debits and credits) have been posted to the account.

Credit card accounts that calculate finance charges due using the adjusted balance method incorporate a grace per꧅iod. Why? Because purchases made and paid for during the interim period between the last statement and the close of the current billing cycle, do not figure in the acc𒀰ount holders’ adjusted balance.

Using the Adjusted Balance Method

Here is an example of how the adjusted balance method works: Assume 𒁃you carried a credit card balance of $10,000 at the end of your card’s previous billing cycle. During the next period’s billing cycle, you pay down your balance by $1,200. You also receive a credit for a returned purchase of $200.

Assuming you made no other transaction൲s during that period, your account’s adjusted balance for purposes of calculating your finance charges would total $8,600 instead of being based on the💟 starting $10,000.

Advantages of the Adjusted Balance Method

Consumers can experience significantly lower overall interest costs with the adjusted balance method. Finance charges are only calculated on ending balances, which results in lower interest charges versus other methods of calculating finance charges, such as the average daily balance or the 澳洲幸运5官方开奖结果体彩网:previous balance method.

As a condition of the federal 澳洲幸运5官方开奖结果体彩网:Truth-In-Lending-Act (TILA), credit card issuers must disclose to consumers their method of calculating finance charges as well as annual periodic interest rates, fees, and other terms, in their 澳洲幸运5官方开奖结果体彩网:terms and conditions statement. In addition to credit cards and savings accounts, the adjustedඣ balance method is uꦯsed for fee calculations for other types of revolving debt, including home equity lines of credit (HELOCs).