Finance Charge Formula

Finance charges are a type of compensation that allows the lender to make a profit for giving the funds, or extending credit, to a borrower. Here is a finance charge formula to calculate your charges. The better way to avoid the financial charges is by not carrying a balance. To calculate finance charge just multiply the current balance owed, Annual Percentage Rate (ARR) and billing cycle length. One can calculate the credit card's new balance by adding the finance charge and old credit balance.


Finance Charge(F) = P × ( r / 100 ) × T
B = F + P


P = Current Balance Owed
r = Annual Percentage Rate (APR)
T = Billing Cycle Length
B = New Balance You Owe

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The most common financial charges are the Interest rates. It just not includes the interest rates but also the financial transaction fees.

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