Question

Why would finance charges be applied to a customer with a credit card?

• if the customer did not use the car
• if the customer paid the entire bill
• if the customer did not pay off the entire bill
if the customer charged the maximum amount

Answer 1

Finance charges are applied to a customer with a credit card if the customer did not pay off the entire bill. Here are the reasons why:

• Credit cards allow customers to borrow money from the credit card company to make purchases.
• When a customer uses a credit card, they are essentially taking out a loan from the credit card company.
• The credit card company charges interest on the loan, which is known as a finance charge.
• If the customer pays off the entire bill by the due date, they will not be charged any finance charges.
• However, if the customer does not pay off the entire bill, the remaining balance will be subject to finance charges.
• Finance charges are typically calculated based on the average daily balance of the account over the billing cycle.
• The finance charges will continue to be applied until the customer pays off the entire balance.

Therefore, if the customer did not pay off the entire bill, finance charges will be applied, regardless of whether they used the card, paid the entire bill, or charged the maximum amount.