Definition
Double cycle billing is a method of calculating finance charges based on the average balance owed over the past 2 billing cycles.
Analysis
Credit card issuers use double cycle billing as a means for applying finance charges based on the average balance held over the last 2 billing cycles, which normally lasts for 2 months. This average daily balance is the basis for calculating finance charges on the account.
This practice has come under fire since it can cause a cardholder to incur interest charges on a balance that was completely paid off in the following month. It does not apply if the cardholder repays the balance every month.
Cardholders affected the most by double cycle billing are those that sometimes carry a balance from one month to the next. Those who often have fluctuating balances could also pay more based on the double cycle method of calculating interest.
UPDATE: Double cycle billing has been prohibited by the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009.
