Finance charges

Most of the credit card companies make the bulk of their money from finance charges. A finance fee comprises of the extra charges that are added on to your existing balance if it isn’t paid off in full within the grace period, or before the next billing cycle.

The charges can vary depending on your balance and the APR of your credit card. Although they may seem small if you’ve got low balance of around a few hundred dollars, they can certainly add up and form a big amount if the unpaid balance is huge.

It is also possible that you won’t be doing much more than paying the interest on your credit card, if you only make the minimum payment each month, while leaving the principal balance untouched.

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