When your billing cycle ends And you sit down to check your monthly statement when you notice something called a finance charge. Which makes you wonder “What are credit card financing fees? And is there any way to avoid it?” Let’s learn more about fees, including the financing costs, how they are calculated and how to avoid them.
What Is The Credit Card Financing Fee?
In the simplest terms a Credit Card Finance Fee is any fee. Related to the use of your credit card There are various fees. Many are included in the finance cost, such as:
- Interest
- Late fees
- Cash advance fees
- Foreign transaction fees
- Annual fee
- Balance transfer fee
The minimum monthly payment consists of a percentage of your balance. Plus any finance fees you owe. Funding fees can vary between issuers and cards. For example, some credit cards do not charge foreign transaction fees. While some credit cards may charge a fee. Not sure how much your card costs? Please check your card’s terms or contact your card issuer’s customer service hotline.
How to Calculate Finance Fees from Credit Cards
Your financial expenses will vary from month to month. This is because it depends on other variables such as your account balance. There are several more ways. Calculating your financial expenses Depends on the issuer Not sure which format to use? Please contact your card issuer for clarification.
Average daily balance
The average daily balance method combines the balances for each day. Then divide that total by the number of days in the billing cycle to get the average. Then multiply this number by 1/12 of the annual interest rate (APR), or annual percentage rate. (You can find this number in your card terms.) The result is your monthly finance charge. If you want to reduce your financial expenses, you can reduce your financial costs. Consider paying off your balance throughout the month to help lower your daily balance.
Daily balance
The daily balance method is similar to the average daily balance. Except instead of calculating the average daily balance throughout the billing cycle. The daily balance is multiplied by 1/365 of the annual percentage rate (APR), resulting in a daily finance fee. These are added together to create a monthly finance charge.
Previous balance
This method uses the balance carried over from the previous billing cycle to calculate the monthly finance fee. This method may be less beneficial for cardmembers if they want to pay throughout the billing cycle.
How to Avoid Credit Card Financing Fees
There are a few things you can do if you want to avoid credit card financing fees.
- Pay off your balance in full each month.
- Apply for a 0% interest card
- Be aware of fees and avoid those that come with fees, such as cash advances.
- Use a card with no balance transfer fees.
- If you are traveling abroad Whenever possible, use a card with low or no foreign transaction fees.
- Apply for a card with no annual fee.
But don’t worry, paying off your credit card balance each month can help you avoid these fees.
Also, if you have a card with a 0% introductory APR, be sure to mark your calendar for when the card expires. This is to avoid having a balance on the card when that time comes.
Summarize
Financing fees consist of many things. Therefore, you should consider the fees that your credit card may incur. If you’re hoping to avoid credit card financing fees altogether, your best bet is to make sure you pay off your balance in full each month.