Finance Charge Definition

Finance charge is a generic term used to describe charges on an account including interest, fees, and penalties. Finance charges are typically assessed on a periodic basis-often monthly. For example, at the end of every billing cycle, a credit card account is assessed a finance charge composed of interest, any associated fees, and any penalties. Federal law mandates that all finance charges be presented on billing statements and credit agreements. In the simplest terms, a finance charge is simply the cost of obtaining and using credit.