What Credit Costs

For both revolving and installment credit, the cost of borrowing depends on the same factors:

• How much you’ve borrowed, called the balance or principal
• The annual percentage rate (APR) the lender uses to figure the finance charge
• How long it takes you to repay, sometimes called the term

With a credit card, the finance charge includes only interest. But with a loan, it also includes other costs, like application fees and checks on your creditworthiness.

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