How to Calculate Finance Charges on a Daily Basis
Businesses usually express a finance charge as an annual percentage rate. However, when calculating the finance charge to apply to a periodic billing statement, businesses must first convert the annual percentage rate to a daily finance charge based on the balance of the periodic statement and the annual percentage rate. You can manually calculate the daily finance charge based on the periodic statement balance.
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Instructions
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Determine the balance owed as of the periodic statement date. For example, assume the balance owed is $6,000.
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Determine the annual percentage rate. You will find the annual percentage rate listed on the initial credit contract. For example, assume the annual percentage rate is 12 percent.
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Multiply the annual percentage rate by the periodic statement balance. Continuing the same example, $6,000 x .12 = $720. This figure represents the annual percentage charge based on the current balance owed.
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Divide the annual percentage charge by 365. Continuing the same example, $720 / 365 = $1.97. This figure represents the daily finance charge based on the current balance.
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