Understanding Credit Card Finance Costs

By Guest • Sep 8th, 2009 • Category: Credit

Other than the actual charge from each purchase, there are other fees associated with the use of a credit card. The amount you will have to pay on your credit card account each month will be increased by these other costs. Some of the common fees that are found on your credit card statements from time to time are the annual fee, the late payment fee, the finance charge, and the APR. The finance fee is added to it every month while the other fees will be added less frequently.

The credit card finance charge will be the dollar amount you are required to pay the credit provider for the use of their lines of credit when purchases are made. The finance charge amount will depend on the APR or the annual percentage rate and the outstanding balance on your card will determine how much you will pay in credit card finance charges. Your individual credit card company will in most cases have its own policies and approach in calculating the finance charge on your card.

Your outstanding balance on your credit card may be calculated during one billing cycle or within two billing cycles so you need to understand how your credit card company calculates this balance.

The adjusted balance, the average daily balance, and the previous balance are the three types of balances used to calculate the amount of your annual finance charges. Each of these balances has something in common, in that you have to decide if new or recent purchases will be counted as part of the relative balance. The decision in this matter will be the key to figuring the credit card finance charge. The timing of different purchases and payments on the billing cycle and the carry-over balance will be the reason for a variation in the finance charges.

Operating under a minimum finance charge policy, many credit card companies are now providing their services. The finance charges each year will not vary or change due to differences in the card’s balance each billing cycle when this type of finance charge gives the cardholder a flat rate. A carry-over balance that goes into the next credit card billing cycle will signal the activation of the minimum finance charge on the credit card.

The credit card finance charge is an unavoidable cost that has to be paid in order to be able to keep using the lines of credit on your credit card to make purchases. If you have a working knowledge of what affects the finance charges that are added to the balance you pay on your credit card it will be a very helpful piece of information. You need to know what to do if you are assessed a wrong amount and have to pay for something that is not acceptable. In order to know what to be aware of on your monthly statement, you should invest some time in the examination of your credit card terms and uses.

It makes good sense to keep up on any changes in your finance charges that add to the balance of your credit card, since you use the card because of it’s reasonable rates and terms.

Visit JSNet.org for more information on the best credit cards such as cash rewards credit cards along with many great articles including ‘Credit Card Grace Periods‘, visit today to read more of these great credit card articles!

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