Charge Accounts & Credit Cards

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What is a charge account?

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A charge account is a type of credit account that allows customers to make purchases on credit, typically offered by stores to encourage sales.

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What is a finance charge?

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A finance charge is the interest that a company charges on a credit account for not paying the total amount owed by the due date.

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How do you calculate a finance charge?

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To calculate a finance charge, multiply the outstanding balance by the finance charge rate (expressed as a decimal). For example, 2% of $4,586 is $91.72.

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Can you review your credit card account online?

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Yes, most credit card companies allow you to review your account online.

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What happens to your credit card balance when you make a payment?

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When you make a payment on your credit card, the payment amount is subtracted from your current balance.

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If Piper's credit card has a balance of $9626.42 and she makes a payment of $223.50, what is her new balance?

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$9626.42 - $223.50 = $9402.92.

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What is the purpose of charge accounts for stores?

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Stores issue charge accounts to their customers to generate sales and encourage repeat business.

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What is the difference between a charge account and a credit card?

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A charge account is typically store-specific and requires full payment by the due date, while a credit card can be used at multiple locations and may allow for minimum payments.

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What is the impact of late payments on credit cards?

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Late payments can result in additional finance charges, penalties, and a negative impact on your credit score.

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What is a credit limit?

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A credit limit is the maximum amount of credit that a financial institution extends to a borrower on a credit card or charge account.