We use the model language below to describe the balance on which the finance charge is computed. We allow the customer to pay closing costs with an initial advance. We have to manually do our initial statements to show these closing costs correctly but the daily balance used to compute the interest finance charge includes the closing costs and treats them as an advance. Does this make our balance computation disclsosure incorrect?
We figure the finance charge on your account by applying the periodic rate to the “daily balance” of your account for each day in the billing cycle. To get the “daily balance” we take the beginning balance of your account each day, add any new purchases/advances, and subtract any unpaid finance charges and any payments or credits. This gives us the daily balance.