A finance charge is the dollar amount that is paid for credit. It is calculated by taking the total installment payments of an item less the cost of the item.

Question

A finance charge is the dollar amount that is paid for credit. It is calculated by ​taking the total installment payments of an item less the cost of the item.

Quizplus · Accepted Answer

A finance charge is indeed the total cost of borrowing credit, which includes interest and any other charges associated with the loan. It is calculated by taking the total amount of installment payments (which includes both the principal and the interest) and subtracting the cost of the item (or the principal amount of the loan). This gives the total amount of interest and fees paid over the life of the loan, which is the finance charge.

A Finance Charge Is the Dollar Amount That Is Paid