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How Are Finance Charges Calculated?

admin — Fri, 06 Aug 2010 03:42:10 +0000

Whether you are shopping for a new credit card or wondering about the one that you may already have, knowing how to calculate the finance charge applied to that card is important. First, however, it is equally important to know what finance charges really are.

A credit card finance charge is the amount of money that you pay to the credit card company in order to use their credit. This is not the same as the purchase amount balance. The purchase amount balance is the dollar amount of the purchases that you made using the card. If you pay off the purchase amount balance within the stated amount of time that the company allows, you will have no finance charges applied to the amount. It is when you carry over your balance that finance charges are triggered and added to your account.

Finance charges are calculated using the amount of your outstanding balance and APR. The APR is the Annual Percentage Rate and all credit cards use them to figure finance charges. It is important for consumers to understand that the ARP can vary from one company to the next, and it can even vary within the same company. It is for this reason that consumers should always look for the companies with the lowest APR’s. This will save you money in the long run.

There are several ways that credit card companies can calculate the finance charges that they apply to consumer credit. Many people do not realize it but the method that is used can make a difference in the amount of money that you will have to pay. Here are some of the methods that credit card companies use to figure finance charges on your outstanding balance:

They can calculate using one billing cycle or two billing cycles.

They can use the adjusted balance, previous balance, or the average daily balance.

They can exclude or include new purchases in the balance.

You will normally find that you have a lower finance charge when the company uses what is known as one-cycle billing and uses the average daily balance method which excludes new purchases. Much of this, however, depends on the balance and the time of the month that you make purchases and payments.

The next lower finance charge method is the adjusted balance, followed by the previous balance method. You can see which method the company is using by reading the bill that you receive. This information is usually contained on the back side.

It is also important that you understand that some companies will have a minimum finance charge system. When a credit card company uses this system you will be charged that set amount even if your calculated finance charge is less than that amount.

Of particular importance to some credit card holders are the cash advance programs that come with some cards. Consumers should be very careful when using credit cards for cash advances. Many companies that offer cash advances treat those advances differently than they do purchases. Before you use your credit card for a cash advance, make sure you look for the details of how you will be charged for that advance.

You will certainly want to know what the APR is for cash advances. Keep in mind that this may be significantly higher than the APR that is used for purchases. You should also investigate the fees that may be applied to the transaction. Fees are in addition to the finance charge that you will have to pay.

Lastly, find out how your payments will be credited. Some companies will apply your payments to your purchases first and then to any advances in cash that you have taken.

Use your credit card wisely and keep track of your finance charges and you will enjoy your credit more fully and avoid some of the pitfalls that many consumers experience.

By: Peter Kenny

About the Author:

Peter Kenny is a writer for The Thrifty Scot, please visit us at Bank Charges and Best Credit Cards [http://www.creditcards-gb.co.uk] Visit http://www.thriftyscot.co.uk

Caffeinated Content

Credit Cards, The Technology Pleasure

admin — Mon, 08 Feb 2010 17:05:47 +0000

Do you know how deep technology affects our life? We can say that technology is the main part of our life now. Without technology, we can’t live like what we dreamed about. The fact is technology makes our life simpler and easier. We can find this fact on many things. Car, air plane and even the way we buy our everyday needs are affected by the technology. Talk about shopping, there’s one way that become the most convenient way in paying and buying everything that we need. Yes, its credit card

There’re many type of credit cards that you can find nowadays. But, most of them will give you the ease in your shopping activity. But, you also need to know, by using this car it means you lend money from the company. And you need to pay it. Therefore, you need to manage it well, so you won’t get any big problems on your finance later. But, it’s not like its convenient function that this car has; finding the best card for your need is hardest thing to do. Yes, there’re many choices, but, there’re also many limitation and circumstances that you need to have to get this car. One of them is your credit scores. If you have bad credit, it’s almost impossible to get it. But, there’s some place that provide the credit cards for people with bad credit. This credit card for bad credit type usually has easy requirement that you need to full fill.

And to get it, you can find it many website that offered service to get the credit card that you want. Even, you can find the online service to get this card. Just follow the instruction and fill up simple online form, and you got your credit card. So, if you want to taste the pleasure of life presented by the technology, you can try using this card. But, you also need to manage it well, so it won’t cause you more trouble. Have a try!!

Understanding Your Current Personal Finance Situation

admin — Sun, 04 Oct 2009 14:27:43 +0000

It is important: understanding your current personal finance situation is something that every person needs to do. By understanding what is going on with your personal finances you will be able to better control them. This can be one of the best ways to avoid money problems and debt.

Getting started is the hardest part. It can seem almost impossible to figure out where to begin when tackling finance issues. The best place to start is to simply look at expenses and income.

As the staples of a good budget, something every person should have, expenses and income are the main financial issues a person needs to understand. To begin you should gather all the relevant information. You may want to get bills, pay stubs and anything else that could help you list out your expenses and income.

The first thing to do is to track your daily expenses. This includes eating out, shopping and gasoline. You want to include these on your expenses list. You may need to gather receipts or actually keep a log for a week to be able to come up with an accurate account of your daily expenses.

Write out a list of expenses and then write out your list of income. At this point you should concern yourself with ensuring everything is listed. If your expenses or income vary then try to get a good average. You should have expenses separated into daily expenses and monthly expenses so you can see where your money is really going. Plus this will help when you go to budget your money.

Now you can begin to look at your debt. You should make out a list of your creditors. Your list should include the creditors contact information, the balance of your debt and the interest rate.

Now you should look at your personal finance accounts. This includes things like checking, savings and stocks. You want to list them all, including their current value or balance.

After going through your expenses, income, debt and personal finance accounts you should have a fairly good idea of where your personal finance matters stand. This should be a great platform for you to build upon to get your personal finances in good order. From this information you should be able to create a budget, get debt under control and best manage your personal finance accounts. You should be able to get the big picture about your personal finance situation and to understand it completely.

By: Joseph Then