To compare the interest calculated using different balance methods, we need to understand how each method works and the effect of large payments made during the month.
### Understanding the Balance Methods
#### Previous Balance Method
In the previous balance method, the interest is calculated based on the outstanding balance at the beginning of the billing cycle. This means that any payments made during the month are not considered in the calculation of interest for that billing period.
#### Average Daily Balance Method
In the average daily balance method, the interest is calculated based on the average balance over each day of the billing cycle. This method considers changes in the balance throughout the month, including any payments made, and averages them out over the total number of days in the cycle.
### Comparing the Methods with Large Payments
When large payments are made during the month, they directly affect the balance in the average daily balance method, because the daily balance decreases on the days when payments are made. This results in a lower average balance over the month. In contrast, the previous balance method does not consider these payments for the current period, so the balance remains higher.
### Conclusion
Given that payments during the month reduce the balance used for calculating interest in the average daily balance method, the interest calculated using this method will be lower compared to the previous balance method, which does not account for mid-cycle payments.
Therefore, the correct answer to the question is:
D. lower
