Finance Charge

Note: Use this option only if you are finance charging past due balances for your carriers/dealers.

During account billing processing, Circulation calculates the finance charge amount based on answers to certain Business Rules and whether or not the account can be charged finance charges (as defined during account setup).

Business Rules determine the first aging period with which to apply finance charges, and whether the charges should be flat or a percentage. Business Rules also determine the finance charge amounts, as well as the minimum and cutoff amounts, and the charge code that should be used.

Circulation calculates finance charges as follows:

• It determines the type of finance charge to apply to past due account balances (flat or percentage). If “flat”, selects the amount defined in Business Rules if the account has any past due balances in applicable aging periods. If “percentage”, determines the percentage amount of the past due balance.

• It determines the cutoff finance charge, based on Business Rules. If the calculated amount is less than the cutoff amount, the finance charge is waived.

• It determines the minimum applicable finance charge, based on Business Rules. If the calculated amount is less than this minimum, Circulation applies this minimum.

• It determines the maximum allowed by the state/province for this route (set up using this option, as described below). If the calculated amount is greater than the maximum amount entered here, Circulation applies the maximum. Otherwise the calculated amount is applied.

As an example of finance charge calculation, suppose a account’s balance is 3.50, and the answers to certain Business Rules indicate that the finance charge percentage is 2%, the minimum finance charge is 1.00, and the maximum percentage for this state is 10%.

Circulation would calculate the finance charge as 0.07 (2% of 3.50 balance), but the minimum amount (as defined in Business Rules) is 1.00.

However, the maximum percentage allowed for this state is 0.35 (10% of the 3.50 balance); therefore, 0.35 would be the finance charge applied.

To set up maximum finance charge amounts and percentages:

1. Select Finance Charge from the Account Billing menu to display the Finance Charge screen.

   
2. Click the Add icon and complete the following fields.

   Field	Type	What to enter
   STATE	setup (3)	Enter the state for which finance charges apply.
   MAXIMUM FINANCE CHARGE PERCENT	decimal (5)	Enter the maximum finance charge percentage, such as 5%. This is usually defined by law.
   MAXIMUM FINANCE CHARGE	decimal (6)	Enter the maximum late fee amount, such as 25.00. This is usually defined by law.
3. Click OK to save the finance charge in the database or Add Another to save the existing record and add another finance charge.