Credit Card Outstanding Balance

Credit Card Outstanding Balance Calculation Methods

Average daily balance method: Average daily balance method including new purchases is the sum of the outstanding balances for every day in the billing cycle (including new purchases and deducting payments and credits) divided by the number of days in the billing cycle.  Average daily balance method excluding new purchases is the sum of the outstanding balances for every day in the billing cycle (excluding new purchases and deducting payments and credits) divided by the number of days in the billing cycle.

Two-cycle average daily balance method: Two-cycle average daily balance method including new purchases is the sum of the average daily balances for two consecutive billing cycles.  Two-cycle average daily balance method excluding new purchases is the sum of the average daily balances for two consecutive billing cycles.

Adjusted balance method. The balance is the outstanding balance at the beginning of the billing cycle minus payments and credits made during the billing cycle.

Previous balance method. The balance is the outstanding balance at the beginning of the billing cycle.

 Depending on the balance you carry and the timing of your purchases and payments, the average daily balance method excluding new purchases, the adjusted balance method, and the previous balance method tend to result in lower finance charges than the other balance calculation methods.