September 15, 1991|By Glenn Burkins | Glenn Burkins,Knight-Ridder News Service

Do you wait for the last possible minute to pay your credit card bills?

If so, you may be throwing away money.

Most cards charge interest based on your "average daily balance." So the longer you wait to pay, the higher your average balance will be.

To understand how this works, let's look at how credit card companies calculate your average balance.

First, find out how many days are in your billing cycle. Most cards have 30-day cycles, meaning that cardholders have 30 days between bills.

Now, suppose you had a credit card balance of $1,000 carried over from last month and made no new purchases this month.

If you paid $900 three days before your next bill was due, that would mean you had a $1,000 balance for 27 days and a $100 balance for three days. Multiplying $1,000 by 27 days, you get $27,000. Multiplying $100 by three days, you get $300. Add the two and you get $27,300.

Now, divide $27,300 by 30 (the number of days in your billing cycle). You get $910. That's your average daily balance.

If your card charges an annual interest rate of 19.8 percent (1.65 a month), you would pay $15.01 in finance charges next month.

But let's see what would have happened had you paid the $900 two weeks before your bill was due, instead of three days before.

If you had made the payment 14 days early, based on a 30-day billing cycle, you would have had a $1,000 balance for 16 days and a $100 balance for 14 days.

That gives you an average daily balance of $580. And based on the annual interest rate of 19.8 percent, your finance charge next @month would be $9.57.