Question

Which method used to calculate finance charges is most favorable to the card issuer?

a.
adjusted balance
b.
average daily balance
c.
previous balance
d.
usual balance

Answer 1

usual balance

Explanation:

Answer 2

Answer: c. previous balance method

The method used by credit card companies to calculate finance charges in which it is most favorable to the card issuer is the previous balance method. This is computed by charging the interest into the new billing period. This is least favorable to cardholder thus, most favorable to card issuer.