What do creditors typically exclude in the adjusted balance method?

The adjusted balance method is commonly used by creditors to calculate finance charges on a credit card account by considering the balance at the end of the billing cycle after certain transactions. In this method, creditors typically exclude prior unpaid finance charges from the previous balance. This means that when calculating the adjusted balance, the focus is on the current unpaid balance and any new transactions that have occurred during the billing cycle, rather than carrying over any previous charges that were not settled. This approach helps provide a clear calculation of the current charges based solely on the most recent activity, ensuring that consumers understand how much of their balance is subject to finance charges for that specific period.