Finance Charge

The amount owed to a lender by a purchaser-debtor to be allowed to pay for goods purchased over a series of installments, as opposed to one lump sum at the time of the sale or billing.

A finance charge, sometimes called the cost of credit, is expressed as an annual interest rate levied upon the purchase price. It does not include any amounts that the lender might require for insurance premiums, delinquency charges, attorney's fees, court costs, collection expenses, or official fees that might be incurred should the debtor default in the repayment of the debt.

Federal and state "truth-in-lending" laws mandate that the complete cost of finance charges be fully disclosed on credit agreements and billing statements.

Cross-references

Consumer Credit Protection Act.

Mentioned in ?

References in periodicals archive ?

I have been charged for the finance charges. In August, I made the full payment as per the statement and expected everything to be okay, but when I checked the statement of September I noticed there was a finance charge again.

An accidental wrong payment

The new card involves an introductory offer of zero percent finance charge on the outstanding retail balance until December 2009.

Maybank targets 150,000 for new Amex card

Section 1128 amends TILA to prohibit creditors from terminating open-end credit accounts solely because the consumer does not incur a finance charge on the account.

Statement by Edward M. Gramlich, Member, Board of Governors of the Federal Reserve System, before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, March 25, 1999

From my perspective, credit cards are the preferred product because of three sources of income: finance charge, interchange and fee income.

Credit, debit, prepaid relationships in 2012- are you prepared?

It requires creditors to highlight the cost of credit as a dollar amount (the finance charge) and as an annual percentage rate (the APR).

Statements to the Congress

Consumers who use Duo would still fund transactions they authorize with a PIN from their checking accounts, but transactions they authorized with a signature would be funded by a bank-provided line of credit, one with a credit card's finance charge and drawing the credit card's higher interchange income.

Will that be debit or credit?

For example, a card issuer that advertises its annual percentage rate must also disclose any minimum finance charge, transaction fee, or other charge.

Statement submitted by the Board of Governors of the Federal Reserve System to the Subcommittee on Consumer Credit and Insurance of the Committee on Banking, Finance and Urban Affairs, U.S. House of Representatives, February 9, 1994

The shortfall in payment of 12 Fils resulted in a finance charge of Dh35.53 being levied on me in the next statement.

Unwarranted finance charges

"We will calculate finance charges on cash advances by multiplying the 'average daily balance of cash advances' by the total number of days in the billing cycle, and multiplying the product by the daily periodic rate of finance charge then in effect."

Verbatim

The bill would amend section 128(b) of the Truth in Lending Act to require good faith estimates of disclosures about the cost of credit (such as the annual percentage rate (APR), finance charge, and payment schedule) whenever a home purchase mortgage that is subject to RESPA is satisfied and replaced with another consumer credit transaction.

Statement by Lawrence B. Lindsey, member, Board of Governors of the Federal Reserve System, before the Subcommittee on Consumer Affairs and Coinage of the Committee on Banking, Finance and Urban Affairs of the U.S. House of Representatives, May 27, 1992

In return, you pay a finance charge or "discount fee" on the total amount of the receivables--a process called factoring.

Five alternative ways to finance your business

Typically, a factor will buy or advance 70%-80% of the money due on a receivable and in turn assess a finance charge or "discount" (LaPaglia suggests 4%-5% as a benchmark) on the total amount of the receivable.