What type of account typically incurs finance charges when credit is used?

What type of account typically incurs finance charges when credit is used?

• A. Checking account
• B. Credit account
• C. Savings account
• D. Investment account

Answer: (B)

A credit account typically incurs finance charges when credit is utilized. Credit accounts, such as credit cards and lines of credit, operate by allowing consumers to borrow money up to a certain limit. When a user makes purchases or accesses credit from these accounts, they may incur finance charges on the outstanding balance if it is not paid in full by the due date. These finance charges are often calculated as a percentage of the outstanding balance, leading to additional costs for the consumer if the borrowed amount is not managed properly. In contrast, checking accounts primarily provide a way to deposit and withdraw funds, allowing for daily transactions without incurring finance charges, as they do not typically involve borrowing money. Savings accounts aim to hold funds and accrue interest, rather than allowing for credit use. Investment accounts are designed for managing investments and do not operate on the principle of borrowing or credit, thus avoiding any related finance charges.

A credit account typically incurs finance charges when credit is utilized. Credit accounts, such as credit cards and lines of credit, operate by allowing consumers to borrow money up to a certain limit. When a user makes purchases or accesses credit from these accounts, they may incur finance charges on the outstanding balance if it is not paid in full by the due date. These finance charges are often calculated as a percentage of the outstanding balance, leading to additional costs for the consumer if the borrowed amount is not managed properly.

In contrast, checking accounts primarily provide a way to deposit and withdraw funds, allowing for daily transactions without incurring finance charges, as they do not typically involve borrowing money. Savings accounts aim to hold funds and accrue interest, rather than allowing for credit use. Investment accounts are designed for managing investments and do not operate on the principle of borrowing or credit, thus avoiding any related finance charges.