Why Does the Billing Cycle Matter?

billing cycle

The billing cycle is the length of time between the date when a credit card bill is sent and the date that the cardholder’s credit card account is billed for that cycle. It’s usually the same amount of time as the grace period, which is the period of time a credit card account can be used without paying interest. There are two cycles every month: for purchases and for balance transfers. For purchases, the billing cycle begins on the date that the credit card bill is sent. For balance transfers, the billing cycle begins on the date when the credit card.

The Billing Cycle and Credit Cards

It’s easier to understand why the billing cycle matters when we consider why credit cards charge interest charges on purchases. Most credit cards charge an annual percentage rate (APR) in the range of 18 to 20 percent. To calculate an effective APR, you must add interest charges for each month of that billing cycle (i.e., the three months after the billing cycle has begun) to the APR you calculate for the current period. The total interest charges for the entire period must be equal to or greater than the APR. If this is not the case, you don’t have an APR, but an interest-rate spread, which you will want to understand because interest charges are added to the bill, and in most cases, can also be subtracted from the bill.

The Billing Cycle for Purchases

If the cycle for purchases begins on the date that the credit card bill is sent, it’s possible to make purchases before the bill is sent. If you make a purchase and pay within the grace period, your payment won’t be considered as part of your credit card bill. This is the exception, not the rule. In this case, if your bill is for more than $10, you will be charged interest. If your bill is for less than $10, you will not be charged interest if you pay within the grace period. If you make an unauthorized charge, your bill will be charged interest. Why Does the Billing Cycle Matter for Balance Transfers?

The Billing Cycle for Balance Transfers

The main difference between a balance transfer and a purchase card is that there is a full billing cycle for balance transfers rather than just one billing cycle. This means that if you make one balance transfer, you can’t make another until you get your first balance transfer bill (and sometimes you can only make one balance transfer in a 30-day period). To simplify things, many balance transfer cards only allow you to transfer a balance, but never make purchases while the account is open. This is very convenient, but you might not want to count on this. Your spending, for example, might still be reflected in your credit score.

Conclusion

The expiration date of your credit card’s grace period isn’t really relevant because you can’t stay current on the account in between the billing cycles, which can add interest to your outstanding balance. However, if you want to avoid interest, you can make a few changes to your payment routine and get all of your payment information in order to avoid late fees and fees from a late payment.


What is the Average Daily Balance Method?

Average Daily Balance Method

What is the Average Daily Balance Method?

The average daily balance method is an alternative credit card billing method to the monthly statement method. Under this method, credit card companies calculate interest based on how much you owe each day, rather than an average of how much you owe during a month. This method tends to result in higher interest rates and fees, as card companies need to make more money on interest charges to make up for the fact that they don’t receive interest for the days when you don’t carry an amount due. (Note: the idea behind the last sentence is taken from wikipedia and could be expanded upon by providing a formula for figuring the average daily balance to reflect the APR for the method.)

Advantages of the Average Daily Balance Method

The average daily balance method does not charge an annual fee. Do not incur additional fees for interest calculations. You may pay your card balance in full each month. You may not pay a balance transfer fee if you transfer to another credit card. The average daily balance method does not require a minimum balance to stay in the system. Disadvantages of the Average Daily Balance Method You will be charged an annual fee in most cases. It may result in higher interest rates and fees. Can be more difficult to track monthly account balances.

Disadvantages of the Average Daily Balance Method

You can’t see all the interest charges that you could be paying at the same time each month, due to the spread in the daily interest charge and the average balance calculation. You are paid interest over a period of a year or longer, whereas monthly interest charges can be paid all at once. This makes using this method easier for people who pay off their bills each month, but who don’t understand the long term costs associated with not paying off their credit card bills each month. As mentioned in the above section, having a high balance can result in the possibility of your card being declined for purchases at some places, which can be costly.

Conclusion

It’s very easy to spend money on your credit card, without even realizing it. However, spending more than you have in your checking account can result in consequences including being late on your bill, high interest rates, and potentially a penalty APR which can result in charges being more expensive than it would normally be. As such, the best way to manage your credit card debt is to follow a simple strategy and pay off your card each month. Which Credit Card Finances Best For Me? To answer this question, you first need to understand how much debt you have. You can estimate this by reviewing your recent bank statements, and estimating the amount of money that you spend each month. Alternatively, you can use one of the many online calculators to estimate your own current balance.


HOLD REL MEM CR: Questions and Answers

hold rel mem cr

This is typically a code used by Chase Bank (possibly others) indicating that they are pending a credit to your account. The credit amount associated with the “HOLD REL MEM CR” status is usually associated with recent a large deposit. The financial institution needs more time to communicate with the paying bank to collect the funds and deposit into your account.

They also usually allow a (small) portion of the funds to be immediately available.

If you use Chase Bank and want more details, call their Deposit Hold Team at 1-877-691-808 (Press Option 1).

HOLD REL MEM CR – What does it mean?

It’s a temporary delay on your deposited funds that stands for “hold relinquished member credit”. It has also been referred to as “hold released member credit”.

The prior status to this may be “HOLD Memo Debit” or simply “Hold”.

Can I use to My Funds?

It depends, you can only access what is stated in your “available balance”. If the amount you want to use is within that amount, then yes.


What Is Misc Credit For Chase Bank

credit

What Is Misc Credit For Chase Bank?

If you’ve ever applied for a credit card, a car loan, or a mortgage loan, you’ve probably seen the term “misc credit” on your application. What is miscellaneous credit, and why do lenders ask for it? In general, miscellaneous credit is information about your income, debt, and other personal information that you can’t directly connect to a specific type of loan. Most applications will ask for income information (your annual salary, for example), but if you’ve worked multiple jobs or are self-employed, they may also ask for your average monthly income. They may also ask for your debt information, such as the amount of debt you have on all your charge cards

What is miscellaneous credit?

Every lender asks for income, debt, and other details about your personal finances so they can make a decision about how risky it is for them to lend to you. Most of the time, lenders only care about the first two, and they’re willing to make you a loan even if you’ve been unemployed for most of the year and haven’t been paying your debts for quite a while. Lenders are also more willing to give you a mortgage or car loan if you have a consistent income and can prove that you’ve always paid your bills on time. But for most types of loans, they want a third number—an average monthly income—for context. If you’ve told the lender that you make $6,000 a month, then you can expect a loan of $300,000.

Why do lenders ask for it?

Because when applying for a loan, you need to include all of the necessary information in order to receive one. While the type of loan you’re applying for is largely based on your credit score, your financial history is just as important. Without knowing your income and debt details, your lender has less information to gauge how likely you are to repay your loan.

How to calculate miscellaneous credit

When lenders need to determine how much money you have available to borrow, they often look to your income to help calculate your credit. But it’s important to remember that different types of credit such as loans, credit cards, and mortgages have different borrowing limits. Your income and your debt vary greatly for a variety of reasons. You may have a part-time job that you also do on the side, which makes your income appear lower than it actually is. You may have student loans or other debts, but they’re less costly than a car loan. Or you may have a large mortgage on your house, but you’re managing to pay it off without much trouble. In any case, your income is just one part of the equation that lenders use to determine how much money you can borrow.

Conclusion

When you apply for a new card, mortgage loan, or other financial product, you may have to provide information from other products in your account. In these situations, your lender is interested in the financial status of your company. Most lenders won’t require this information if you already know it. But if you’re applying for credit through a mortgage lender or for a credit card, there may be some interesting questions asked about your salary, revenue, and assets. For more information on getting credit, please visit the Credit Card Comparison Help Center where you’ll find a list of credit cards for every budget.


How to Calculate Average Daily Balance Now

How To Calculate Your Average Daily Balance (ADB)

To calculate average daily balance (ADB) on your credit card is an important part of calculating your credit card interest rate. Your average daily balance is the average amount you carry on your credit card each day during the billing cycle. This can be calculated manually or automatically by your credit card company. Either way, calculating it yourself is easy, and it will help you predict how much your credit card bill will be at the end of the month before your bill arrives.

What is an average daily balance?

An ADB is calculated using the amount listed on your credit card statement divided by the number of billing cycles in the current billing period. An example, if your balance is $10,000 but the billing cycle for the current month is 1, your ADB is $10,000 divided by 12. A monthly average balance is also calculated by dividing the amount by 12. Get your free credit score Below are two methods for calculating your ADB, manual and automatic: 1. Manual: Enter the amount on your credit card in the corresponding boxes.

How do I calculate an average daily balance?

The easiest way to calculate this value is to divide the number of months in the billing period by 30, and then multiply by 3. When the number is divided by 3, it is divided by 365. In other words, if your amount is $10,000, and you have 30 months in the billing period, your ADB will be $95.46. What is the difference between a median daily balance and your credit card balance? The difference between your ADB and your credit card amount due is the dollar amount that you pay in interest each year for carrying a balance on your credit card. If you have a balance of $10,000 and your calculated balance is $95.46, your interest rate is 5.9%. To calculate your interest rate, divide your balance by your ADB.

Here’s an Example

  • Ending amount for Day 1: $1000.00
  • Ending amount for Day 15: $2000.00 (because you bought some things worth $1000 on this day)
  • Ending amount for Day 20: $1500.00 (because you paid off $500 on this day)

The above example would really look like this:

Day Balance
1 $1000.00
2 $1000.00
3 $1000.00
4 $1000.00
5 $1000.00
6 $1000.00
7 $1000.00
8 $1000.00
9 $1000.00
10 $1000.00
11 $1000.00
12 $1000.00
13 $1000.00
14 $1000.00
15 $2000.00
16 $2000.00
17 $2000.00
18 $2000.00
19 $2000.00
20 $1500.00
21 $1500.00
22 $1500.00
23 $1500.00
24 $1500.00
25 $1500.00
26 $1500.00
27 $1500.00
28 $1500.00
29 $1500.00
30 $1500.00
Total $40,500.00

Now divide the total ($40,500.00) by the total number of days (30) and you get an ADB of $1,350.00 which is what your credit card company will calculate your credit card interest against.

To make your life easier, I have created an average daily balance calculator.

Calculating an average daily balance automatically

You can usually check your credit card company’s online calculator to calculate your ADB on a credit card. It will show you the total amount you owe, the date you made your last payment, and your ADB. Calculating your daily balance manually To calculate your median daily balance manually, calculate the number of transactions you made on your credit card in the previous billing cycle. Also, subtract the amount you paid off from the total amount you owe, so that you know your ADB. Example: “I made 10 transactions in the previous billing period. The calculated value was $350.

Conclusion

Most people forget to calculate their credit card bills, and the first bill that arrives is always a shock to the system. Using credit card bill calculation tools and calculators will help you understand your credit card bill in detail and plan accordingly. Take these ideas with you to the next time you receive your bill, or you will be caught by surprise.


HOLD MEMO DR vs HOLD REL MEM CR

HOLD MEMO DR” is identical to “HOLD REL MEM CR”. Per our other article, HOLD REL MEM CR, it means there’s a large deposit pending credit to the account, which means it needs extra time to process the amount.

Typically, a portion of the large deposit should still be available for use though. But it may be good to call the bank directly.

If you use Chase Bank and want more details, call their Deposit Team at 877-691-808 (Press Option 1).


APR vs. APY Calculator Simple Explanation

In very general terms, I always knew the Annual Percentage Rate (APR) and the Annual Percentage Yield (APY) were essentially the same, but there must be some difference. I finally decided to do some research and discovered the below.

  APR APY
Definition Annual Percentage Rate Annual Percentage Yield
Main Difference The annual cost of borrowing money that includes fees The rate at which your deposit account can earn money
Account Types
  • Credit Cards
  • Mortgages
  • Savings Account
  • Certificates of Deposit
Formula APR = ( ( ( ( Fees + Interest Paid over Life of Loan ) / Loan Amount ) / Number of Days in Loan Term ) * 365 ) * 100
APY = ( 1 + (r/n) )^n – 1
r = annual interest rate
n = the number of times interest compounds per year

Balance $
APR (%)  
Days in Month  
Days in Year  
Interest Per Day $
Interest Per Month $
Interest Per Year $
Balance $
APY (%)  
How much you gain depends on how often the amount compounds
Below you’ll see how much you’ll get at the end of a year (assuming 365 days in a year)
Balance Compounded Daily $
Balance Compounded Monthly $
Balance Compounded Annually $

Mortgage Refinancing Can Lower Credit Score

I recently decided to refinance my mortgage. It was on a 5/1 ARM from over a decade ago. I decided not to refinance once it started to reset each year because, simply, the rate kept getting reduced year after year.

This year, as the economy has recently appeared to stabilize and with my rate going up a bit last year, I thought this would be a good time to re-finance. I found a highly recommended loan officer, received a rate I was happy with, and peace of mind knowing that my monthly mortgage payments would be more predictable. The closing went smoothly and my first thoughts were of relief knowing that I finally got it done.

However, with all the peace of mind came a shock as well. I get a free FICO score each month through one of my credit cards. The score had been just above 800 for many months, up until my mortgage re-finance was closed. It dropped almost 50 points! I had no idea what happened. I immediately thought it was identity theft. So, I ran my free annual credit report at Annual Credit Report. Nothing seemed out of the ordinary there. I ran another a few weeks later just in case there was a delay. But still, everything looked normal.

It wasn’t until recently where my FICO report stated the reasons for my credit score:

Proportion of loan balances to loan amounts is too high

FICO® Scores weigh the balances of mortgage and non-mortgage installment loans (such as auto or student loans) against the original loan amounts shown on a person’s credit report. Your score was impacted because your proportion of installment loan balances to the original loan amounts is too high.

It then all made sense. One major impact on your Credit Score is how much credit you have available. After more than a decade, I put a nice dent in my original mortgage, which frees up a lot of available credit. When I decided to refinance my mortgage, I pretty much reset the amount of available credit I had back to zero, which greatly impacted my score.

It’ll gradually improve of course, as long as I follow the rules of how to raise my credit score. If I had known of this prior to refinancing, I would honestly still go through with it because I like my monthly payments being more predictable and at an acceptable interest rate. But I really would have liked to know what to expect in terms of my credit score impact too. So, hopefully I have helped shed some light on this situation for you today.


Can Employers Check Your Employment History: Why Employers Check Your Credit

"With the job market becoming more competitive as the economy drops, it’s more important than ever to have an edge over the next person."

Lets say you’ve received the job interview of your dreams and aced it. On top of that, the interviewer(s) think you’re a great fit and are anticipating giving you an offer. Before you pop out the champagne and celebrate, you may want to wait for your credit report check to clear first. Most people don’t know this, but unless you’re applying for a position in Washington or Hawaii, most companies will perform a credit report check before giving an offer to a new employee.

You may be wondering why employers perform credit report checks. It comes down to these three reasons:

  • Your credit report lists your previous employers. With this information the employer should be able to confirm your employment history and identity.
  • Depending on the position that you’re applying for, your credit history will, unfortunately, define how well you can be trusted with valuables. Again, this specific reason would be if you’re applying for a position that requires handling large sums of money or is susceptible to theft/bribery, such as diamond appraisers or financial executives.
  • Overall, studies show employers believe there is correlation with how responsible a person is with their personal finances and their work ethic. If you’re sloppy with how you manages your funds, the employers will believe the quality of a your work will be sub-par as well.

Due to federal law, the (potential) employer is required to provide you a copy of your report, which agency generated your report, and told they have the right to dispute. You will most likely never hear this reason given to you because most employers would rather make the process less complicated for themselves. So, simply saying you weren’t the right fit or that they found someone more qualified is the typical excuse.

Now, you do have rights based on the Fair Credit Report Act (FCRA). Before an employer can run a credit check, you must authorize it by providing written consent. If the whole credit report check ordeal makes you uncomfortable, then you have the option of rejecting the request to run it. If you decide to not authorize the credit report check, just be aware that you will most likely have no chance of getting the job offer.


Credit Inquiry – Hard Pull vs. Soft Pull

Have you heard that whenever your credit report gets accessed, your credit score will get lower as well? This is a bit terrifying and unbelievable, right? Well, I’ve got some news for you. It’s PARTLY true. Now, before you start refusing to protect your identity by regularly check your credit score or get your credit report, let me explain.

There are two types of credit inquiries. One is called a “hard inquiry” or “hard pull”. And the other is called a “soft inquiry” or “soft pull”. Only a hard inquiry will cause your credit score to be lowered – based on the credit score formula breakdown.

What’s the Difference Between a Hard Inquiry and Soft Inquiry?

Hard Inquiry/Pull

First, as I mentioned above, a hard inquiry will affect your credit score, while a soft inquiry will not. Hard inquiries are typically well in your control, where you need to provide explicit consent to having someone run it against your social security number. So if you’re applying for a credit card or a loan, you can be sure it’ll be a hard inquiry/pull.

Though one hard inquiry may only affect your score minimally, multiple hard pulls can dramatically cause your score to drop. So make sure you only approve hard pulls once in a while.

Soft Inquiry/Pull

A soft inquiry is usually done without your knowledge, unless you monitor your credit report regularly. Soft inquiries are still visible on your credit report. They just don’t hurt your score.

Employers doing background checks and companies who want to provide you with some credit related offer typically run these. You know that “pre-approved” letters your get? Yep, that company most likely did a soft pull on your before sending out that offer.

And don’t worry; running a credit check on yourself is considered a soft pull. This makes sense because it’s known that securing your identity is extremely important. Credit agencies want you to check your credit report/score regularly. This can help you protect yourself from any mistakes or fraudulent activity.

A Related Story

When I was a freshman in college, I was sucked into applying for a lot of credit cards. I was approved for all the cards I applied for, until maybe my fifth card. After that I started receiving letters that said I was denied because of “too many credit inquiries”. I didn’t think much of why, until now. I was young and only cared about my free t-shirt. A few, I admit, I still use. They keep surprisingly well. If I had known about the ways to improve your credit score, I would have definitely been less inclined to apply for so many at once. Good news is that it didn’t cripple my credit and I’m still in the green of the credit score range.


5 Best Ways To Raise Credit Score

"Be Better Prepared and Learn the Top Five Sure Fire Ways to Raise Your Credit Score! Based Off Of the Credit Score Breakdown."

Ways To Improve Your Credit Score: Part 4 of 4

« Read Part 3: Credit Score Breakdown

Based on what we know and can reasonably assume on the FICO credit score formula, follow these simple guidelines and you’ll be well on your way to improving your credit score:

  1. Always pay your bills on time. This means ALL your bills, not just credit cards, but your utilities, rent, etc. The way credit reporting companies know that you’ve been late is when your creditors submit it to them. So make sure your creditors are happy by not paying anything late. Whenever I have accidentally missed a payment, I call my biller to confirm they haven’t reported it any credit agencies.

    If you do have late payments on your record, then you’ll just need to make sure you pay your bills on time going forward and wait for the older entries to be removed.

  2. Have a high credit limit on your cards, but use very little of it! The best scenario would be to limit the number of credit cards you have (a good number is four maximum) and just make sure each of them has a high credit limit. Of course, ultimately, you just want to make sure you only use a small fraction of your credit limit, whether it is a high or low limit.

    If you are maxing out your credit cards, then make sure you’re paying more than just the minimum payments and work towards freeing up your debt.

  3. Start your credit history immediately! If you can get a credit card under your name now, then do it. Of course, use it responsibly per my last point. If you’re a parent of a child younger than 18 and you trust him/her to be responsible, then I recommend opening an account for them as a co-signer. This will give them a jumpstart at having a credit history. Though each year impacts their overall score minimally, it will add up.

    There isn’t much you can do to improve this except wait for your points to slowly increase as your credit history ages.

  4. Don’t just stick with credit cards! If you can afford it and are approved, get a mortgage or car loan. Don’t be too quick to pay it all off at once either, since the mix of credit types will help your credit score and this displays an ability to get and pay a variety of loans plus how responsible you are. Do your best to avoid the consumer finance loans though!

    If you’ve only been relying on only one type of credit, then diversify. For example, if you’re used to buying your car with a single payment then it may be wise to go for a car loan with a reasonable rate instead. It’s bit counter-intuitive, but it may be worth it for those few extra points.

  5. Limit the number of times you apply for a credit card. As I mentioned earlier, a good number of credit cards to have would be four (4). Anymore and you’re really hurting your score with these “hard inquiries”. Applying for a mortgage, having your employer check your credit, or even checking your own score/report are “soft inquiries” and will not hurt your score.

    If you want to increase your score, then simply don’t apply for any new lines of credit that will require a hard inquiry. Hold off on applying for any new credit cards.

That’s it! Follow those five suggestions and you should be on your way to a higher credit score. Though it may not be easy. It’ll ultimately require a lot of discipline and responsibility on your part to make sure your credit score is good. Based on the FICO credit scale, a good score is between 660 to 720 points. It is said the median score in America is 723. How does your credit score compare?