Cash advance fees, late payment fees, and balance transfer fees are considered ____________ fees.

• A. penalty fees
• B. finance charges
• C. interest fees
• D. service fees

Answer: (A)

Verified step by step guidance

1. Understand the context of the question: The problem is asking about the classification of specific types of fees (cash advance fees, late payment fees, and balance transfer fees) in financial accounting.
2. Review the definitions of the options provided: Penalty fees, finance charges, interest fees, and service fees. Each term has a distinct meaning in financial accounting.
3. Penalty fees: These are charges imposed for violations of terms, such as late payments or exceeding credit limits. They are often associated with non-compliance.
4. Finance charges: These are costs incurred for borrowing money, including interest and other fees related to the credit account. They are typically tied to the cost of credit usage.
5. Match the fees described in the problem (cash advance fees, late payment fees, and balance transfer fees) to the correct category based on their nature. For example, late payment fees are penalties for non-compliance, while cash advance fees and balance transfer fees may fall under service fees or finance charges depending on their purpose.