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What is a finance charge? How about a purchase charge? The jargon used to describe credit card late fees is enough to make anyone’s head spin. Unfortunately, a survey by CreditCards.com of 100 common credit cards found that while fees have remained stable (or even gone down a bit) thanks to recent annual percentage rate (APR) hikes, these charges are still pretty universal—and potentially very costly.

Of the 100 credit cards surveyed, for example, 98 charged a late fee for missed payments. And credit card companies made $104 billion from the fees and interest we all pay on our credit card debt. Any interest and fees we pay are collectively called “finance charges.”

Finance charges might sound like another complicated fee, but they’re really just a way of referring to the interest charges that accumulate on your credit card balance. The amount you pay in interest is determined by the credit card’s APR.

In an ideal world, we would all pay off our credit card balance in full at the end of each billing cycle. If you’re doing that, then you don’t have to worry as much about your interest rate or racking up finance charges. But in reality, nearly 45% of credit card accounts are considered “revolvers,” meaning they carry a balance from month to month.

And any time you have an unpaid balance, you’re probably going to be paying a finance charge on that money. Because most credit cards have sky-high interest rates (the average for new accounts was 17.01% in October, 2018), the amount of interest you’re paying can add up quickly.

What is a Finance Charge?

A credit card finance charge refers to all fees and interest you pay on credit card debt. You’re essentially paying the credit card company a fee in exchange for them financing your debt. Again, finance charges only come into play if you carry a credit card balance.

If you pay off your credit card balance in full when it’s due, or you’re paying your balance during a 0% interest rate promotion, then you won’t accrue any finance charges. Typically, there is a grace period between the end of a billing cycle and when the payment is due. After that due date, a finance charge is typically calculated based on the amount you owe, how long you’ve owed it for, and your APR at the time your bill is due.

Even if you make the minimum payment when it’s due, you can still accrue a finance charge if you don’t pay the full statement balance. The finance charge will simply be levied on the amount of debt you still owe, and a late fee can be additionally assessed if you don’t make at least the minimum payment by the due date.

Using the Finance Charge Formula

The finance charge formula is based on your annual percentage rate and credit card balance—which means the exact amount can vary from billing cycle to billing cycle.

The APR is used to calculate a daily interest rate, which you can figure out by dividing your APR by 365. You then multiply your daily interest rate by how much debt you carry on your credit card, and how many days you’ve carried that debt, to determine the total finance charge. This is added to what you already owe on your credit card.

For example, if your credit card has a 16% APR, then your daily interest rate is .16 divided by 365 days, which equals .0004383. That means you accumulate .04383% of interest per day. (Remember that when converting numbers into percentages, you need to divide by 100. That’s why 16% became .16 instead.)

That daily credit card interest rate of .04383% is then multiplied by the balance you’re carrying and by the number of days you’ve had this balance.

So if you carried an unpaid $1,000 balance for 28 days after it was due, then $1000 x .0004383 x 28 days = $12.27 in finance charges.

Using our example, you’re adding $12.27 to your credit card if you’ve been carrying a $1,000 balance on your card for 28 days with a 16% APR. That may not seem like a lot up front, but it can add up quickly, because if your balance isn’t paid off in full by the next billing cycle, you can incur another finance charge.

The Credit CARD Act of 2009 did put some limits on fees credit card companies can charge, but once finance charges start piling up, it can get a bit overwhelming. And P.S., if this math gave you a headache, you can always consult a finance charge calculator .

How Can I Get Rid of a Finance Charge on My Credit Card?

The only way to completely avoid paying a finance charge is to pay your credit card in full by the due date. If you’re already paying a finance charge, the only way to get rid of it is to pay off the existing credit card debt that’s incurring the charges. This can get you back to a clean, finance charge-free slate.

It should be noted that some credit cards offer a promotional 0% APR for a certain amount of time. During the promotional period, finance charges do not accrue. It is possible to use a 0% APR credit card to pay off existing debt.

These are usually called balance transfer credit cards. While there is usually a balance transfer fee, the promotional 0% interest rate can allow you to pay off your debt without incurring finance charges. However, promotional 0% interest rates are typically temporary, so if you aren’t able to pay off the new credit card within the promotional period, you could end up back in the same place you started.

Can a Personal Loan Help?

If you need to get out from under your credit card debt and stop incurring finance charges, one way to do that is to pay off the credit card debt with an unsecured personal loan. If you’re considering a personal loan to get out of debt, look for a loan with a lower interest rate than you are paying on your credit card.

With some credit card interest rates hovering around 20%, using a personal loan can be a simpler way to pay off your debt without dealing with exorbitant interest rates.

When taking out a personal loan, you can decide whether your interest rate is fixed or variable. And because personal loans have set terms, you’ll know exactly when you’re going to be out of debt, as opposed to chipping away at your credit card balance indefinitely.

If you’re considering paying off your credit card debt with a personal loan, keep in mind that some personal loans charge origination fees and prepayment penalties. Fortunately, SoFi personal loans don’t have origination, application, or prepayment fees.

The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website on credit.
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Got credit card debt? You’re certainly not the only one. Americans owe a total of $905 billion n in credit card debt alone. Finding your way out of credit card debt can be pretty stressful. But maybe the energy you’re expending watching your balance creep up could be better spent devising a payoff plan.

Paying off credit card debt is a crucial step toward saving for the future. Credit card debt, unfortunately, might slow you down if you’re saving for a house, or trying to open your own business. That’s why knocking out credit card debt now may help your finances in the long run.

If you’re feeling overwhelmed by your monthly credit card payments, creating a debt payoff plan is an excellent way to reclaim control over your debt and your financial life. Even if you’re making multiple debt payments every month, having a plan to get through it all may put you at ease. This guide will help you make a step-by-step plan to getting debt-free.

Organize Your Budget

Before you clean up your debt, you first have to organize it. Start by figuring out your monthly income after taxes, your non-negotiable expenses, and the debt payments you have to make each month.

And when you’re writing this all down, make sure you include every debt, from your student loan payments to that $500 medical bill you you’re paying off over the next few months. When you’re writing out your expenses, don’t forget about utilities, groceries, gas, and your designated take-out budget.

This is a good time to check if there are expenses in your budget that you could easily cut out. Maybe just in going through your bank statements, you’ve noticed you’re spending too much on eating out. To help you easily track your spending, sign up for SoFi Relay. You can keep tabs on your cash flow and spending habits so you know where you stand.

Or perhaps you could save some cash by shopping at a less expensive grocery store, or using public transportation more. The more excess spending you can shave from your budget, the easier it can be to put more money toward your credit card debt.

Based on your monthly expenses, figure out how much money you are able to contribute to your credit card debt each month. If you are just paying the minimum on your credit card each month, determine how much additional cash you could contribute to your debt each month.

Then factor it right into your budget. If you plan to pay $400 toward your credit card debt each month, for example, and you get paid twice a month, maybe you get into the habit of always paying $200 to your credit card debt the day after you get paid.

Choose a Debt Payoff Method

For some of us, our credit card debt isn’t on one card, but is instead spread out over multiple cards. You can either order your credit card debts from smallest to largest (i.e., “The Snowball Method”) or from highest to lowest interest rate.

If you want to use the Snowball Method, you’re going to pay your smallest credit card debt off first, and then turn your attention toward the next smallest, and so on. By ordering your debts from smallest to largest, you build momentum, because you’re potentially knocking out debts more often.

When you are working on paying off your smallest credit card debt, you may want to put any extra resources you have toward getting rid of that debt. In the meantime, don’t forget to pay the minimum balance due to the rest of your credit cards.

On the flip side, the advantage of paying off your credit card debt starting with the highest interest rate card is pretty straight forward: It saves you the most money. Why? Because the cards with the highest interest rates are, naturally, costing you more.

If you want to pay your debt off in the most cost-effective way, start with the highest interest rate credit card, while paying the minimum balance on all the other cards. Once you’re done with the highest interest rate card, turn your debt payoff attention to the next highest interest rate card. Continue until you’re credit card debt free.

And don’t forget to put extra cash toward your debt when you can. Paying additional money toward your debt is called “The Snowflake Method”—there’s a lot of snow analogies when it comes to debt payoff). Holiday bonuses? Put it toward your debt. Birthday cash? Right to your credit card payment. Tax return? Instead of springing for a vacation, re-route that cash to your credit card.

Consolidating Your Credit Card Debt

If you’re not a number cruncher, complicated debt repayment methods might create more stress than they’re worth. Instead of these methods, you could consider replacing your multiple credit cards with a single credit card consolidation loan. That would mean making one monthly payment, instead of trying to keep up with paying off multiple credit cards.

By taking out a personal loan, it’s finally possible to focus on paying off one bill with one fixed interest rate and a set loan term. Depending on your financial history, you could qualify for a much lower interest rate on a personal loan than you’re paying on your credit cards. And paying your credit card debt off with a low-rate personal loan could help simplify and expedite your credit card debt payoff plan.

SoFi doesn’t provide tax or legal advice. Individual circumstances are unique. Consult with a qualified tax advisor or attorney.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website on credit.
The information provided is not meant to provide investment, tax or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. Advisory and automated services offered through SoFi Wealth LLC. An SEC registered investment advisor. SoFi Securities LLC, member FINRA / SIPC .
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Most consumers are aware of major types of loans, like mortgages, auto loans, and student loans. But there’s another type of loan that’s becoming increasingly popular as consumers seek out attractive rates and terms: personal loans. Though this kind of loan may enjoy less brand recognition, personal loan rates have become more competitive, and more popular as a result.

Average personal loan balances are expected to rise to nearly $8,000 by the end of this year, even as delinquency rates remain low.

Rising balances mean more money is available to customers who qualify for a personal loan and could use a cash infusion—or want to take advantage of competitive personal loan rates by using them to pay off existing loans at a lower interest rate. But what does it mean for the economy?

Take a superficial glance at household debt in the U.S., and you’ll notice that our current debt has exceeded 2008 levels. A closer look, however, makes it clear that the borrower profile in 2017 is much healthier than it was a decade ago. There is less housing debt now, and more loans are going to borrowers with good credit.

At the same time, bankruptcy has reached record lows, according to a Federal Reserve Bank of New York report released in May 2017.

And those personal loans? In order to figure out if they’re right for you, you need a comprehensive understanding of personal loan rates, including how they’re calculated, and whether they’re compatible with your financial timeline. Here’s some more info on personal loan rates.

How Personal Loan Rates Are Determined

Lenders use several factors to determine the interest rate on a personal loan, including details about your financial background and about the loan itself. What kind of financial questions can you expect?

Well, when lenders talk about a borrower’s creditworthiness, they’re usually referring to elements of your financial background such as your credit history, your income and employment, how much debt you already have, and whether you have a cosigner.

The loan terms can also affect the rate; for example, the size of the loan or how long you want to take the loan out for often affects personal loan rates. (Loan term is something borrowers should be thinking about as well. A longer loan term might sound appealing because it makes each monthly payment lower, but it’s important to understand that a longer-term loan may cost you significantly more over time due to interest charges.)

While borrower qualifications and loan type are the main factors lenders use to determine personal loan rates, borrowers also need to consider another essential question: Which lender is the best fit when they all offer different personal loan rates?

Average Personal Loan Interest Rates

The average interest rate for two-year personal loans from commercial banks was 10%, as of May 2017. Though there are several factors that determine personal loan rates (see more on this above), one of the big ones is credit history. A lower credit score generally means you can expect a higher interest rate on your personal loan.

If the interest rate is higher, the terms of your loan are likely to be less favorable, because taking out a personal loan with a higher rate means you’ll ultimately have more money to pay back than someone who takes out the same loan with a lower rate.

Borrowers with poor credit may face a loan rate as high as 36% APR, which in many cases is the highest rate that can legally be applied to personal loans.

How to Calculate Personal Loan Rates

There are many personal loan calculators available online, but you need some basic information about the kind of loan you’re looking for before you can use any of them. Loan calculators typically ask for your desired loan amount and loan term, and they may ask you to put in other details, such as your ideal interest rate and loan start date, your location, or your estimated credit rating.

Once you put in the requested information, the calculator can tell you your estimated monthly payment and possibly the total payment due, the payoff date, and the personal loan rate you’d be likely to get.

To find out how a SoFi personal loan can save you money by helping you pay off high-interest debt, the SoFi personal loan calculator can help. No matter which loan calculator you use, keep in mind that these are rough estimates and may not match the actual rates you receive when a lender has conducted a more complete loan review.

How Personal Loan Rates Compare to Home Equity Rates

A home equity line of credit, or HELOC, requires homeowners to put up their homes as collateral so they can access a revolving line of credit. It has traditionally been an adjustable-rate loan, meaning the interest rate changes and can rise during the repayment period.

The loan can be used for expenses such as large purchases or home renovations. HELOC borrowers can borrow up to their approved credit limit (which usually amounts to most of their home’s equity, depending on their qualifications) and pay interest on the amount they withdraw.

For personal loans, typically borrowers don’t need to put up a home or other collateral to get the money, and they can choose a fixed or variable rate. A HELOC loan is a secured loan, which means it requires collateral, whereas a personal loan is typically an unsecured loan, which takes collateral completely out of the equation.

If you’re unable to pay back a secured loan, the bank can seize your collateral, which in the case of a HELOC loan is your house. Therefore, a personal loan can be safer because you don’t have to put valuable collateral on the line.

The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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An increasing number of workers in the United States are telecommuting, ranging from those who are self-employed entrepreneurs to those employed by companies that permit, endorse, or even require telecommuting.

Telecommuting advantages are numerous. Remote workers don’t have a long commute to the office (no commute at all, actually), which allows them to get to work quickly and easily. When they arrive, they won’t get distracted by water cooler gossip, and they can work with the sniffles without infecting anyone else. Because they don’t need to drive to work, they use less gas, which helps the environment and is a money saver.

This arrangement can work well across generations. Millennials have been called the driving force behind telecommuting, but it’s an ideal arrangement for older workers who need more flexibility in their schedules but aren’t yet ready to retire.

Overall, remote workers can focus on the job at hand in a quiet space, set up in a way that allows them to be as productive as possible.

Simple Home Office Room Ideas

Here’s the beauty of telecommuting: home office organization can be arranged according to your needs and preferences. While your coworkers have to deal with the noisy plight of open-office floor plans, you have the flexibility to organize your home workspace in a way that suits you.

Start by choosing the best room in your home for your office. Options range from transforming a spare bedroom to using a section of the basement—some even construct a separate outbuilding. What about an attic remodel to create private office space that’s separate from the rest of your house? You can even add your own office bathroom.

After you’ve decided where you’ll put your office, determine the big-picture layout. You’ll want to include a desk, for sure. How about a couch? A physical board where you can post calendars and documents? Built-in cabinets? If you will regularly (or even occasionally) have clients come to your home office, where will they sit? What will make them feel comfortable?

Strategically determine how and where to place lighting. “Poor lighting,” notes an article in The Spruce , “can reduce your energy, dampen morale, produce eyestrain and headaches, and ultimately impair your ability to work effectively.” This isn’t an area where it makes sense to skimp, so ensure you’re getting enough light in a way that doesn’t produce glare. The article notes how natural light adds unique benefits. How would adding extra windows—or even a skylight—transform your home office?

Heating and cooling is crucial, because you need to be comfortable to work at your best. And again, if you will be seeing clients there, even sporadically, appropriate heating and cooling is doubly important.

Since you’re going to be spending a good portion of your day in your office, you’ll want to make it look attractive. Should you wallpaper? Or paint and add eye-catching borders? Install plush carpeting or hardwood flooring? Add hardwood cabinets that are functional and beautiful? What pictures would add just the right finishing touches?

Making Your Home Office Comfortable

Ergonomic design can help to prevent stress and strain, and this includes how and where you put your computer, printer, keyboard, mouse and any other equipment you’ll have around your office and on your desk. The Mayo Clinic offers ergonomic office room ideas, including ensuring there is clearance room for your knees beneath your desk. If the desk is too low and you can’t adjust its height, put sturdy blocks beneath the desk legs. Too high? Raise your chair. You can even pad any hard edges on your desk.

The Mayo Clinic also advises readers to keep your mouse within easy reach, on the same surface as your keyboard. Adjust mouse sensitivity so only a light touch is needed. Don’t forget to find the perfect desk chair. Make sure the chair you select offers the support you might need, feels comfortable, and comes with a decent warranty.

Cost of a New Home Office Setup

How much will your new office cost? It depends on a few factors, including the square footage of the space, whether you’ll need to add a new wall to create dedicated office space, whether your wiring is sufficient for the added lighting and equipment, whether your heating and cooling system in your home is sufficient, and so forth.

An article on HomeStratosphere.com offers some general guidance on what you might expect to pay. Here are a few of their 2018 pricing estimates:

•  New wall and accompanying insulation: $1,500
•  Single room rewiring cost: $1,400
•  Flooring:
      •  $2 to $5 per square foot for carpeting
      •  $3 to $18 per square foot for hardwood flooring
•  Skylight: $2,500
•  New fireplace: $,3000

Homeadvisor.com points out how the “success of modern home offices, especially in high-tech industries, depends on your electronic devices.” And, really, how many jobs today don’t rely to some degree on electronic devices? Very few.

In fact, one of the technologies that makes telecommuting possible is videoconferencing. So a fast and effective computer network is typically at the heart of today’s home offices. HomeAdvisor.com shares that the national average for installing this network in a home office is $370.

Installing new phone jacks and associated wiring costs, on average: $164. This site also points out the value of having built-in bookshelves to give your home office a touch of sophistication. For that, figure a potential cost of about $2,293 .

Understanding the Home Office Tax Write Off

First and foremost, you’ll want to talk to your accountant before taking advantage of any home office deductions. In advance of meeting with your accountant, you can find some information about home office write offs at MileIQ.com , including possible ways you might be eligible to deduct a portion of your mortgage payment or rent for some renovations, along with other home-related expenses.

MileIQ explains that your home office needs to be a dedicated workspace—separate from your bedroom and living space—and used exclusively for business purposes to potentially qualify for a home office tax write off.

If you’re interested in deducting home office expenses, it’s important that you keep detailed records, including how much mortgage (or rent) you pay for your home office. (If you do rent, you may want to have a copy of your lease handy when you go see your accountant.)

Also, it’s probably a good idea to keep proof of any property tax amounts you’ve paid, along with your utility payment costs, relevant insurance payments, and any other expenses that may play a role in your home office deductions.

And you can always go to the source and see what the IRS has to say about home office deductions for the current tax year.

Funding Your Home Office Setup

If you don’t have savings to invest in a setup right away, a personal loan can be a great way to fund home renovations for an office space. If one qualifies, personal loans can be used to renovate and create a new office in your home.

If you qualify for a low interest personal loan, it could be a much more attractive option than using high-interest credit cards to fund your home office setup (or continuing to pay bills and manage your finances from your couch).

Plus, when you take out a personal loan, your home is not used as collateral—unlike a home equity line of credit. Because a personal loan is not a lien on your home, you also can get the funds in a lump sum and pay your contractors as various aspects of your home renovation are completed.

The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SoFi does not render tax or legal advice. Individual circumstances are unique and we recommend that you consult with a qualified tax advisor for your specific needs.
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