A minimum finance charge is the amount of money required of a borrower to keep an account current. Paying this amount not only extends the life of a line of credit but also maintains good credit history.
The amount of a minimum finance charge varies based on credit rate, agreements between the client and the lender, and how much has been borrowed. For example, a lender may allow credit to be taken out for one month with no minimum payment required. In this example, there would be no minimum finance charge, or a $0 charge.
As more money is carried from month-to-month more is due to finance the remaining balance. If payments are missed, then the minimum finance charge may rise with the interest rate.
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