Question

Which of the following is not a method used by credit card companies to figure interest?

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

Answer 1

The adjusted yearly balance method is not a method used by credit card companies to figure interest; instead, they typically use the average daily balance, adjusted balance, or previous balance methods.

The method not used by credit card companies to figure interest is b. adjusted yearly balance. Credit card companies commonly use various methods to calculate the interest charges on an outstanding balance. The methods mentioned include:

• a. average daily balance: This involves adding up the balance for each day in the billing cycle and then dividing by the number of days in the cycle.
• c. adjusted balance: This is calculated by subtracting any payments made during the billing cycle from the balance at the start of the cycle.
• d. previous balance: This uses the balance at the beginning of the billing cycle to calculate interest, ignoring any charges or payments made during the cycle.

The adjusted yearly balance method is not a commonly used practice for calculating interest by credit card companies.

Answer 2

The incorrect method for credit card companies to figure interest is 'adjusted yearly balance'. Credit cards typically use average daily balance, adjusted balance, or previous balance methods.

Step-by-step explanation:

The method not used by credit card companies to figure interest is b. adjusted yearly balance. Credit card companies use various methods to calculate the interest charges on your outstanding balance. The most common methods include the average daily balance, which takes into account the balance on each day of the billing cycle, and the adjusted balance, which takes the balance at the beginning of the billing cycle and subtracts any payments made during that cycle. Lastly, the previous balance method uses the balance at the end of the previous billing cycle to determine the interest.