What exactly is a finance charge, and under what circumstances will I need to pay one?
January 17th, 2008 | by admin |X-Malleus asked:
Pretty much exactly what the main question says. I have no idea what a “finance charge” is. For instance, would I be charged a finance charge if I charged a purchase, and then paid the balance immediately?
Pretty much exactly what the main question says. I have no idea what a “finance charge” is. For instance, would I be charged a finance charge if I charged a purchase, and then paid the balance immediately?
Any additional information that could be given would be great, as I’m considering getting my first credit card, and want to know everything I can so that I don’t get myself into trouble.
One Response to “What exactly is a finance charge, and under what circumstances will I need to pay one?”
By Kaiden on Jan 18, 2008 | Reply
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.