The total finance charge is the overall amount each consumer pays on the money he or she borrows through the use of a credit card.
There are several methods of calculating the total finance charge. The most common method of obtaining the total finance charge amount is to multiply the credit card holder’s average daily balance by the set daily periodic interest rate, and then by the total number of days in that particular billing cycle. The sum of this equation is then applied to the consumer’s credit card bill each month.
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