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Question 22 • 2025-2026 GSP Mathematical Reasoning for Decision Making

What is the difference between a service charge and a finance charge?

Answer

A service charge is a fee which must be paid every month, while a finance charge is a one-time fee assessed at the beginning or end of a loan period.

A service charge is a flat fee charged to a borrower, while a finance charge is a fee charged to a borrower based on the amount borrowed.

A service charge is a fee assessed by a lender, while a finance charge is a fee charged by a financial institution, such as a bank.

A service charge is a fee assessed by a lender other than interest, and a finance charge is the total of the interest paid on a loan and the service charge.

Explanation

A service charge is a fee the lender assesses separately from interest. A finance charge represents the cost of borrowing, including interest and service charges. Therefore, choice D correctly describes the difference.

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