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How to calculate HSBC's finance charge

Credit cards are convenient, but if you don't repay the minimum or the entire credit card balance on time, your balance can quickly increase from unnecessary fees.

If you're an HSBC credit cardholder, here's what you need to know about credit card fees such as credit card interest and finance charges.

What is credit card interest?

This is the fee that you have to pay when you don't pay the minimum or the entire credit card bill, or when you make cash withdrawal with your credit card at an ATM.

All HSBC credit cards have an interest-free period. If you repay your credit balance in full by the due date, you won't have to pay any finance charges.

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What is a credit card finance charge?

Finance charges are basically any fees associated with credit usage. It is the total of all fees you have to pay. Your credit card finance charges could include:

  • Interest charge
  • Annual fee
  • Administration fee for foreign currency transactions
  • Cash advance fee
  • Late charge
  • Transfer fee

 

The most common type of finance charge is credit card interest, which is a percentage of what the amount you owe if you haven't repaid the minimum or the entire credit card bill.

Finance charge will be charged on the ending balance amount on a daily basis from the transaction dat.

Annual fee is usually fixed charge. Moreover, other fees such as foreign transaction fee, cash advance fee and late charge are charged as per percentage of the transaction value.

In addition to listing all of your credit card transactions, your monthly statement will show you any finance charges you might need to pay.

How to calculate HSBC's finance charge

When making a cash advance at an ATM

If you use your credit card to make a cash advance, you'll be charged finance charge and cash advance fee right from the moment you make the withdrawal. We recommend that you only use the cash advance in case of emergency, and only when you are aware of all of the the surcharge and know you can afford them.

Here is an example to show you how we calculate the finance charge and fees for cash advances:

Let's say you're using an HSBC Visa Cash Back Credit Card with a credit limit of VND 25 million, a finance charge of 33% per year and cash advance fee is 4% per one withdrawal, regulated by the bank.

On 1 February, you withdraw VND 10 million cash from the ATM with plans to repay it in 14 days. The total amount you would have to pay back on February 14 is: VND 10,531,638.

Calculation:

  • There is a 4% cash advance fee:
    4% of VND 10 million = VND 400,000
    Cash advance fee = 10,000,000 (the cash withdrawal) x 4% (cash advance fee) = VND 400,000

    Your credit card has a finance charge of 33% per year calculated from the time you make the withdrawal until you repay it in full.
  • The principal and cash advance fee at the time of the withdrawal = VND 10,000,000 + VND 400,000 = VND 10,400,000
  • Finance charge in a year = VND 10,400,000 x 33% = VND 3,432,000
  • Divide a year's finance charge by 365 days to find the daily finance charge and multiply it by the number of days you plan to repay =
    VND 3,432,000 / 365 (day) x14 (day) = VND 131,639
  • Finance charge is calculated on a daily basis from the time you make the withdrawal until 14 days after you return the cash advance fee of VND 131,639
  • So on 14 February when you repay the VND 10 million cash advance that you've had for 2 weeks, you'll need to pay VND 10,531,639. (10 million for the principal + 400,000 cash advance fee + 131,638 finance charge)
     

To be sure you've paid the full, correct amount, we recommend rounding up the repayment amount. That would make your total repayment VND 10,532,000 instead of VND10,531,639.

When buying goods and services

First, find out what your credit card's interest free period. As long as you repay your purchase in full during this time, you won't have to pay any finance charges. There are some cases when making your credit card balance, as follows:

In general, depending on how you pay off your credit card balance, finance charges will vary from case to case.

You can refer to the following summary table:
Way to make a repayment of credit card balance on the due date Pay off 100% Pay off from 5% to under 100% Pay off from under 5%
Finance charge No finance charge incurred Finance charge incurred Finance charge and late charge incurred
Description Make a full repayment Make a partial repayment that is higher than the minimum payment Make a partial repayment that is lower than the minimum payment
You can refer to the following summary table:
Way to make a repayment of credit card balance on the due date Finance charge Finance charge
Pay off 100% No finance charge incurred No finance charge incurred
Pay off from 5% to under 100% Finance charge incurred Finance charge incurred
Pay off from under 5% Finance charge and late charge incurred Finance charge and late charge incurred
Way to make a repayment of credit card balance on the due date Description Description
Pay off 100% Make a full repayment Make a full repayment
Pay off from 5% to under 100% Make a partial repayment that is higher than the minimum payment Make a partial repayment that is higher than the minimum payment
Pay off from under 5% Make a partial repayment that is lower than the minimum payment Make a partial repayment that is lower than the minimum payment

How to calculate finance charges for each of the above cases:

Make a repayment of credit card balance in full on or before due date

We advise you to choose this way because if you follow this option, no finance charge will apply (excluding cash advance which is subject to a different charging scheme).

Make a minimum repayment of credit card balance on or before due date

In this case, finance charge will apply. Please refer to the illustration below for more details:

Let's say you're using a HSBC Visa Classic Credit Card with an interest rate of 31,2% p.a., you need to pay at least 5% of your credit card bill or VND 50,000 whichever is more.

So for example:

Your credit card statement date is the 7th of every month, the payment due date falls on the 22nd of every month. During the last month, you in turn made the following transactions:

On 28th April: you bought a set of pots priced VND 1 million. Hence, your ending balance was VND 1 million

On 7th May: this is the statement date. Your credit card statement included the following information:

  • The full payment: VND 1,000,000
  • The minimum payment: VND 50,000
  • The due date: 22nd May
     

On 10th May: you buy the groceries for VND 500,000. Hence, the accumulated balance increased to VND 1,500,000

On 22nd May, is the due date – i.e., the day when the ending balance amount on 7th May is due for payment.

On this day, you made a repayment of VND 600,000, leaving an ending balance of VND 900,000 on 22nd May.

On 7th June, is your next statement date. At the time, you hadn't bought anything else. Hence, the ending balance is VND 900,000 with the finance charge added.

Finance charge at the statement date of 7th June is calculated as follows:

  • Finance charge applied for VND 1,000,000 in 12 days (from April 28 to May 9)
    1,000,000 (ending balance) x 31,2%/365 (daily finance charge) x 12 (day) = VND 10,258
  • Finance charge applied for VND 1,500,000 in 12 days (from May 10 to May 21)
    1,500,000 (ending balance) x 31,2%/365 (daily finance charge) x 12 (day) = VND 15,387
  • Finance charge applied for VND 900,000 in 17 days (from May 10 to May 21)
    900,000 (ending balance) x 31,2%/365 (daily finance charge) x 17 (day) = VND 13,079
     

In total, the finance charge on your credit card statement on 7th June you need to pay in this case is VND 38,724

Don't make at least a minimum repayment of credit card balance on or before due date

Finance charge and late charge will apply in this case.

Continuing with the example above, if you make a full repayment after the due date – e.g., you repaid 

VND 1,000,000 on 28 May, instead of the due date of 22 May 

On 7th June: The credit card statement shows the your ending balance including VND 500,000 with the finance charge and the late charge.

Finance charge at the statement date of 7th June is calculated as follows:

  • Finance charge applied for VND 1,000,000 in 12 days (from April 28 to May 9)
    1,000,000 (ending balance) x 31,2%/365 (daily finance charge) x 12 (day) = VND 10,258
  • Finance charge applied for VND 1,500,000 in 18 days (from May 10 to May 27)
    1,500,000 (ending balance) x 31,2%/365 (daily finance charge) x 18 (day) = VND 23,080
  • Finance charge applied for VND 500,000 in 11 days (from May 28 to June 7)
    500,000 (ending balance) x 31,2%/365 (daily finance charge) x 11 (day) = VND 4,702

In total, the finance charge you need to pay is VND 38,040

Late charge on 7th June is VND 80,000 because late charge is 4% the minimum payment (minimum 80,000 VND). In this example, the late charge of 4% x 50,000 = VND 2,000, which is less than 80,000 VND.

In short, the finance charge and the late charge on your credit card statement on 7th June you have to pay is 38,040 +80,0000 = VND 118,040

When making instalment purchases with a credit card

Your instalment is usually included as part of your minimum payment, which means you need to pay your instalment monthly to avoid late payment fees.

What happens if you miss your instalment payment?

As an example, imagine you are using an HSBC Visa Platinum Credit Card with an interest 33% p.a. to buy a VND 36 million motorbike. You bought it with a 12-month term instalment of VND 3 million per month. To keep things simple, let's say you haven't used your credit card for any other purchases.

Your first credit card payment date was on 2 May but you weren't able to make the payment until 5 May. Here's what happens.

  • You'll get charged finance charge from 25 March to 28 March. That will add up to VND 8,137
    Finance charge = (3,000,000 x 33%)/365 x 3 (days) = VND 8,137
  • You'll also have a late payment fee of 4% of your installment, which comes to VND 120,000:
    Late payment fee = 4% x 3,000,000 = VND 120,000
     

So when you make your payment on May 5 you'll need to pay VND 3,128,137.

Total 3,000,000 (instalment payments) + 120,000 (late payment fee) + 8,137 (finance charge) = VND 3,128,137

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How to avoid finance charges when using credit cards

It is possible to enjoy all the benefits of credit cards without ever having to worry about fees and interest rates. Here's how:

Pay your entire balance on time

Paying your credit card balance on time is the only way you will be eligible for an interest-free period for the next month.

From the moment you receive your statement, you have a grace period of 15 to 25 days to pay your balance with no finance charges. As long as you repay the amount you borrowed in full by the last day of this period, you won't have to pay any finance charges.

In some cases, if you can't pay your credit card balance in full on time, try to make the minimum payment. You'll only be applied the finance charge of the credit card without the late charge. However, consider repaying the remaining balance as soon as possible as the finance charge will continue to accrue based on the unpaid amount.

Pay off your outstanding balance as soon as possible

In case you're in a bit of financial difficulty and can't pay off the entire balance, be sure to pay the minimum to avoid any late fee. Then, pay off the remaining balance as quickly as possible.

Any overdue debt will be charged daily interest. You also won't be given the benefit of any interest-free period on

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Only use cash advances in case of emergency

You should avoid making cash advances or use it only in emergencies. Finance charge is charged daily from the moment you withdraw the money until you fully repay it (with finance charge). If you need to borrow cash, a better option is to consider a personal loan.

A credit card is best saved for making ordinary purchases. This will help you keep a good credit score, which will go a long way to getting a preferential interest rate if you ever want to apply for a bank loan.

Be reasonable with your budget

Before you buy something, you should consider how long it will take you to pay for it.

If you still owe money on your credit card from the previous months, you should limit your spending. Try to pay off your previous bill before you add more to your debt.

For large transactions where you know you'd have trouble making the entire repayment all at once, you can take advantage of the 0% interest instalment offer. This would relieve financial burden.

If you have an HSBC credit card you can use our 0% instalment program at hundreds of major brands from technology, education, healthcare. Even at stores not partnered with HSBC, you can still sign up for 0% instalment with a very low conversion fee.

Credit card finance charge is a very important concept if you have a credit card or if you're thinking about getting one. But now you can see that as long as you remember a few key rules, you'll never have to worry about credit card finance charges.

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