Which method of calculating credit card interest tends to benefit consumers the most?

The adjusted balance method is advantageous for consumers because it calculates interest based on the amount of the balance after payments and credits have been applied during the billing cycle. This means that if a consumer makes a payment during the billing period, the interest charged is only on the remaining balance, not on the full balance before the payment. Consequently, this often results in lower interest charges compared to other methods that do not take payments into account until the end of the cycle.

For instance, if a consumer pays off a portion of their balance mid-cycle, the adjusted balance method acknowledges that payment, reducing the amount on which interest is calculated. This can lead to significant savings over time, especially for consumers who make regular payments. Other methods, such as the monthly balance or daily balance methods, may not provide as much benefit to consumers since they often calculate interest based on the entire balance for the billing cycle or average the daily balances without factoring in payments as effectively. The annual percentage rate method serves to express the cost of borrowing annually but does not directly impact how interest is calculated month to month.