finance charge: meaning, definition, pronunciation and examples
B2formal, legal, commercial, financial
Quick answer
What does “finance charge” mean?
A fee imposed for the privilege of borrowing money, typically expressed as a percentage of the outstanding loan or credit balance.
Audio
Pronunciation
Definition
Meaning and Definition
A fee imposed for the privilege of borrowing money, typically expressed as a percentage of the outstanding loan or credit balance.
The total cost of credit, including interest and other fees, levied by a lender on a borrower.
Dialectal Variation
British vs American Usage
Differences
The term is used in both varieties, but 'finance charge' is the standard legal term in U.S. consumer credit law (e.g., Truth in Lending Act). In the UK, 'total charge for credit' or 'cost of credit' are more common in formal/legal contexts, though 'finance charge' is understood.
Connotations
In American usage, it carries a strong legal/regulatory connotation due to its definition in federal law. In British usage, it may be perceived as a more generic or commercial term.
Frequency
Higher frequency in American English, particularly in consumer finance contexts (credit card statements, loan agreements). Slightly lower frequency in British English, where alternative terms may be preferred.
Grammar
How to Use “finance charge” in a Sentence
The lender imposed a [ADJ] finance charge.The finance charge [VERB] to £50.You will incur a finance charge if the balance is not paid in full.Vocabulary
Collocations
Examples
Examples of “finance charge” in a Sentence
verb
British English
- The bank will finance charge any outstanding balance after the grace period.
American English
- The card issuer finance charges purchases from the transaction date if you carry a balance.
adjective
British English
- The finance-charge calculation method is outlined in the agreement.
American English
- You can find the finance-charge rate in the Schumer box.
Usage
Meaning in Context
Business
The contract clearly itemises all fees, including the annual finance charge.
Academic
The study analysed the correlation between disclosed finance charges and consumer default rates.
Everyday
Check your statement—if you don't pay it off, you'll get a finance charge added next month.
Technical
The APR must reflect the total finance charge, expressed as an annualised percentage of the amount financed.
Vocabulary
Synonyms of “finance charge”
Watch out
Common Mistakes When Using “finance charge”
- Using 'finance charge' to refer to a bank's general service fee (e.g., for an account). Confusing it with a one-time 'transaction fee'. Saying 'finance cost' (less idiomatic).
FAQ
Frequently Asked Questions
No. The interest rate is a component used to calculate the finance charge. The finance charge is the actual dollar amount you pay, which can include interest plus other mandatory costs like service fees.
Yes, often by paying your entire credit card balance by the payment due date (during the grace period) or by taking out a loan with a 0% introductory offer. Always check your specific credit agreement.
On monthly credit card statements (usually as a separate line item) and in the initial disclosure documents for loans, often alongside the Annual Percentage Rate (APR).
Yes. For these larger loans, the finance charge is a significant sum disclosed in the loan estimate and closing documents, representing the total interest and certain fees you will pay over the life of the loan.
A fee imposed for the privilege of borrowing money, typically expressed as a percentage of the outstanding loan or credit balance.
Finance charge is usually formal, legal, commercial, financial in register.
Finance charge: in British English it is pronounced /ˈfaɪnæns ˌtʃɑːdʒ/, and in American English it is pronounced /ˈfaɪnæns ˌtʃɑrdʒ/ or /fəˈnæns ˌtʃɑrdʒ/ (less common). Tap the audio buttons above to hear it.
Phrases
Idioms & Phrases
- “The fine print: the devil is in the finance charges.”
Learning
Memory Aids
Mnemonic
Think of it as the 'price tag' for using someone else's money—the 'charge' for their 'finance'.
Conceptual Metaphor
CREDIT IS A PRODUCT (with a price/charge). BORROWING IS RENTING (money has a rental fee).
Practice
Quiz
Which of the following best defines a 'finance charge'?