Comments on: What exactly is a finance charge, and under what circumstances will I need to pay one? http://financequestionsblog.com/what-exactly-is-a-finance-charge-and-under-what-circumstances-will-i-need-to-pay-one.html Mon, 14 Dec 2009 15:40:02 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: Kaiden http://financequestionsblog.com/what-exactly-is-a-finance-charge-and-under-what-circumstances-will-i-need-to-pay-one.html/comment-page-1#comment-19 Kaiden Mon, 13 Apr 2009 00:00:42 +0000 http://financequestionsblog.com/?p=24#comment-19 A "finance charge" is the fee you pay the bank for the convenience of them letting you borrow money. Some banks calculate your finance charge based upon your average daily balance within the month, while some calculate based on your balance at the time your invoice closes. When you go about signing up for a credit card, the details will let you know what type of APR you'll be getting. With it being your first credit card, you're likely to get an APR around 20%. That means, the interest you'll be charged YEARLY is 20%. To find what you'd be charged monthly, simply divide it by 12; it would end up being 1.67% per month. As an example, if your balance was $100, your finance charge would be $1.67. That sounds cheap, but just remember, it adds up. A “finance charge” is the fee you pay the bank for the convenience of them letting you borrow money. Some banks calculate your finance charge based upon your average daily balance within the month, while some calculate based on your balance at the time your invoice closes.

When you go about signing up for a credit card, the details will let you know what type of APR you’ll be getting. With it being your first credit card, you’re likely to get an APR around 20%. That means, the interest you’ll be charged YEARLY is 20%. To find what you’d be charged monthly, simply divide it by 12; it would end up being 1.67% per month.

As an example, if your balance was $100, your finance charge would be $1.67. That sounds cheap, but just remember, it adds up.

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