How to spot a credit-card rip-off

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Finance charges based on average daily balance

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According to a 2006 Government Accountability Office report, about a third of issuers calculate your finance charges using an average of your current and previous months' balances. This is usually listed in the box as "two-cycle average daily balance" or "two-cycle billing" and means you may pay interest on debt you've already paid off.

For example, if you charge $500 in the August cycle and make an on-time payment of $450, under two-cycle billing, you'd be charged interest on the full $500 in September vs. only the $50 owed.

If your balance fluctuates, opt instead for a card that uses the "average daily balance," which is one-cycle billing. Also, look for the phrase "adjusted balance," which means the issuer subtracts any payment from your beginning balance.

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Last updated July 30 2008: 7:37 AM ET

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