Service Charge

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Definition of 'Service Charge'

A service charge is a fee charged by a financial institution for providing a service. The fee is typically a percentage of the transaction amount, and it can be charged for a variety of services, such as checking account fees, credit card fees, and loan fees.

Service charges can be a significant expense for consumers, especially if they use multiple financial institutions. For example, a consumer who has a checking account, a credit card, and a loan with three different banks could be charged three separate service charges each month.

In some cases, service charges can be avoided by choosing a financial institution that does not charge them. However, this is not always possible, and consumers may have to pay service charges in order to access the services they need.

Service charges are a source of revenue for financial institutions. They help to cover the costs of providing services, such as customer service, account maintenance, and fraud prevention.

Financial institutions are required to disclose their service charges to consumers. This information is typically provided in the institution's fee schedule. Consumers should carefully review the fee schedule before opening an account or using a financial service to ensure that they understand the fees that will be charged.

Service charges can be a significant expense for consumers, but they are also a necessary part of the financial services industry. By understanding how service charges work, consumers can make informed decisions about which financial institutions to use.

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