Do All Discover Cards Use the Two-Cycle Balance Method
Discover Financial Services is a direct banking and payment services company that administers credit card, student, business and personal loans, including the popular cash-back Discover cards. Although the company has adopted the daily balance method of calculating interest, Discover previously relied heavily on the two-cycle balance method.
Before changing its policy, Discover used the two-cycle balance method to apply finance charges for balances carried over from the previous month. Instead of the traditional method of calculating the balance in one billing cycle to charge monthly interest, Discover used the balances of the current and previous months to determine finance charges. This resulted in higher interest charges for some users of the Discover Card.
Effective May 1, 2009, Discover notified its customers of the company’s transition to the daily balance method. This method calculates interest daily using balances accrued at the close of each day. Because daily balances are considerably lower than monthly balances, the daily balance method tends discover card save consumers money.
Pros and Cons
Though the daily balance method is less expensive for consumers than the two-cycle method, cardholders do not see the benefits of this method unless they pay on their loans consistently. People who miss a payment or default on an obligation will see an increase in their finance charges and interest rates.
Discover offers an array of credit cards that do not use the two-cycle balance method. All student and business cards use the daily balance method, and several cash-back cards have abandoned the two-cycle balance method. The Discover More card, for instance, uses the daily balance method and offers up to 5 percent cash back to users. Consumers who use this card can save money in finance charges and get money back on select purchases. Though the daily balance method is available for all newly issued Discover cards, old accounts may still use the two-cycle balance method. Cardholders should read their disclosure statements and call the company at 800-DISCOVER for details.