Answer this question – collectively, what are the interest costs and other fees for using a credit card called?

Credit cards are issued by a bank or an authorized issuing company. Whichever issuing firm approves and issues you a credit card, you are bound to pay certain fees to the firm. You could also accrue interest costs as well. Now the question is – collectively, what are the interest costs and other fees for using a credit card called?

Answer Options to the question of – collectively, what are the interest costs and other fees for using a credit card called?

This question – collectively, what are the interest costs and other fees for using a credit card called?

comes with three answer options. You are expected to choose one out of the three answer options provided. These options are:

1. Finance charge.
2. Balance.
3. Credit line.

Only one answer is correct out of the three. In addition to selecting your answer, you should be able to also explain why your selected option is the right one. 

Tip: Take a moment to read the question one more time and then choose your answer.

The Answer with Explanation

If your answer is “B” (Balance), you are wrong. If your answer is “C” (Credit line), you are also wrong. However, if you chose “A” (Finance charge), you are absolutely correct and here’s why.

Balance is what you are owing to the issuing firm from using your credit card. The credit line is the spending limit you are granted on your credit card. But the Finance charge represents the cost/fee that is charged by the issuing firm. This fee or costs have to be paid by you if you want to continue using the credit card.

In Closing

Some of the fees that you pay on your credit card include; credit card maintenance fees, transaction fees and even fees charged for late payment of outstanding credit card bills. This why “Finance charge” (option A) is the right answer to the question.