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Q:

# How do you calculate finance charges?

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According to Bankrate, there are four different methods used to calculate finance charges for credit cards, all of which are dependant on the specific type of balance a person carries. The different types of balances include previous, two-cycle, daily and average daily.

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In order to calculate the finance charge for a previous balance, a credit card company goes by the balance owed at the beginning of a full billing cycle. The two-day cycle finance charge is determined by any debt that is already paid on the account. For example, if the account begins with a zero balance, and a person charges \$300 to it but pays \$250 by the due date, the person is going to have a finance charge on the original \$300 as long as it's double-cycle billing.

With the daily balance finance charge, the balance carried every day of the billing cycle is multiplied by a tiny fraction of the account's annual percentage rate before it's all added together. For the final balance the daily average balance is multiplied by about one-twelfth of the annual percentage rate in order to determine the finance charge.

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## Related Questions

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Medium term sources of finance are those that a company pays back in 1 to 5 years, and they include bank loans, hire purchases and leases. Some countries' governments also offer special programs that offer medium term financing for companies, such as the Enterprise Finance Guarantee program in the United Kingdom. The purpose of such financing is to help companies expand or buy assets.

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More than 90 percent of merchants in the United States accept Discover credit cards, as of April 2015. Discover credit card acceptance varies internationally, but merchants in many countries, particularly those in Europe and Asia, accept Discover credit cards.

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According to the Better Business Bureau, Comenity Bank is a reputable bank for credit cards. The bureau has given Comenity Bank an A+ rating. The bank has been accredited by the Better Business Bureau since July 2009.