What is daily average balance in credit cards?

Much confusion is caused by and much mis-information given about this method of calculating interest. Because of its complexity for consumers, advisors from Motley Fool (2005) to Credit Advisors (2005) advise consumers to be very wary of this method (unless they can analyze it and achieve true value from it). Despite the confusion of variable interest rates, the bank using this method does have a rationale; that is it costs the bank in strategic opportunity costs to vary the amount loaned from month-to-month, because they have to adjust assets to find the money to loan when it is suddenly borrowed, and find something to do with the money when it is paid back. In that sense, the two-cycle average daily balance can be likened to electric charges for industrial clients, in which the charge is based upon the peak usage rather than the actual usage. And, in fact, this method of charging interest is often used for business cardholders äs stated above. These accounts often have much higher credit limits than typically consumer accounts (perhaps tens or hundreds of thousands instead of just thousands).