Finance Charge

The finance charge is the total cost of borrowing a sum of money which is given either as credit or as a loan. Contrary to what some people believe, the finance charge is not the same as the interest rate. Interest rates along with all other applicable fees are the factors used in the calculation of the finance charge. The finance charge typically is calculated based on the credit card balance so the amount will vary from month to month. As required by law, every credit card issuer will provide in the card holder agreement a detailed explanation of the way finance charges will be calculated.