THE BRIEF · CREDIT
Your statement says $200, the card charges on $933
Card interest is not charged on the balance printed on the statement. It is charged on the average daily balance — and the gap is a multiple, not a rounding.
By the Yoseri News desk · · 2 min read
On the 3rd you spend $1,200. On the 25th you pay back $1,000. Your statement shows $200, and you assume interest will be charged on that. It will be charged on $933.33.
Because a card does not bill the end-of-cycle balance. It bills the average daily balance: what you owed each day, added up, divided by the number of days.
Over a 30-day cycle, $1,200 carried for 22 days then $200 carried for 8 days:
- (1,200 × 22) + (200 × 8) = 28,000
- 28,000 ÷ 30 = $933.33 average daily balance
- at 19.99% a year, i.e. 0.05477% a day: 933.33 × 0.0005477 × 30 = $15.33
The intuitive calculation — $200 × 19.99% ÷ 12 — gives $3.33. The real amount is 4.6 times higher, and nothing on the statement shows the balance it was worked out on.
A second rule makes it worse: as long as you carry a balance, the grace period disappears. New purchases start bearing interest on the day you buy, not at the end of the cycle. A month where you do not pay in full is a month where the whole card changes regime.
Yoseri’s Debt page shows the real cost of each card to the dollar, on your own cycles.
Where the figures come from
The maths in this article starts from the assumptions written above. Run them again with your own figures — you should land on the same numbers.
Yoseri News is an educational publication. Nothing in this article is investment advice, a recommendation to buy or sell, or tax advice. Yoseri is registered as neither an adviser nor a dealer with any market authority.