Finance charge

Finance charge

In United States law, a finance charge is any fee representing the cost of credit, or the cost of borrowing. It includes not only interest but other charges as well, such as financial transaction, transaction fees. Details regarding the federal definition of finance charge are found in the Truth-in-Lending Act and Regulation Z, promulgated by the Federal Reserve Board.

In personal finance, finance charge may be considered simply the dollar amount paid to borrow money, while interest is a percentage amount paid such as annual percentage rate or APR). (reference, title: Focus on Personal Finance (The Mcgraw-Hill/Irwin Series in Finance, Insurance and Real Estate), Authors: Jack R. Kapoor - Les R. Dlabay - Robert J. Hughes, ISBN 10: 0073530638, Edition: 2, Release: 2007-09-25) This definition of finance charge and interest seems to be very narrow and not consistant with the websters definition or the accounting definition.

[{Category:Financial Accounting}]

In financial accounting, interest is defined as any charge or cost of borrowing money. Interest is a synonym for finance charge. In effect, the accountant looks at the entire cost of settlement on a Housing and Urban Developement (HUD) form 1 (HUD-1) document as interest unless that charge can be identified as an escrow amount or an amount that is charged to current expenses or expenditures other than interest, such as payment of current or prorated real estate taxes. (reference, author: Al Giovetti, book title: Accredited Business Accountant Review Course, edition: unsure, current publishing date: 2008, publisher: Accreditation Council on Accounting and Taxation.)

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