Be aware of your credit card issuer's billing practices, which can significantly affect your costs. How your card company treats the balances on which you are charged interest can be critical. Here are examples of potentially high-cost practices that many people don't know about even though card issuers must disclose them:
Two-cycle billing: This billing practice is rare but is used by some card issuers. Practices may vary but, in general, if you pay your credit card bill in full one month but then only pay a portion of the bill the next month, your interest charges ultimately will be based on two months of card charges and not one. This may result in you paying more in interest charges than you would under the more common one-cycle billing method. To find out if your card is subject to two-cycle billing, review the cardholder agreement and disclosures from your lender or call their customer service number.
Payment allocation: This involves cards with multi-tiered interest rates. For example, there may be a low rate on a balance transferred from another card, a higher rate on new purchases, and an even higher rate on a cash advance. If you pay only part of your monthly bill, card companies typically will apply your payment to the balance with the lowest interest rate first, while the highest-rate balance continues to run up interest costs until you pay the entire balance.
Universal default: This happens when a card issuer increases a customer's interest rate because he or she made late payments to other lenders or had an overall decline in a credit score -- even if that customer paid the card bill in full and on time. While this once-common practice is rare, be aware that it could be used.

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