But how many know about the method of charging the interest? I would love to tell you about it. There are about four method of charging the interest which many banks are always made.

First is Average daily balance:

This method, the bank calculate and charge the interest from the sum of the daily outstanding balances is divided by the number of days covered in the cycle to give the average balance for that period.

Second is adjusted balance:

The interest is the result from the balance at the end of the billing cycle is multiplied by a factor in order to give the interest charge.

Third is previous balance:

It’s the opposite version of adjusted balance method. Besides to give the interest charge from the multiplication of a factor and the balance at the end of the billing cycle as adjusted balance, the previous balance derives the charge instead.

The fourth one is Two-cycle average daily balance:

In the case, even the sum of the daily balances of the previous two cycles it used, but the interest is charged over the current cycle only.

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