What is the difference between: interest and bank charges?

Bank Charges are the charges are debited while Any Payment has been cleared in Our Bank account. while Interest is a component which credited / debited  by bank for the utilization of fund by bank or from bank.

• This is the price you pay for borrowing money, usually in the form of a bank loan or overdraft. Your bank statement may include a deduction made for “interest”.-interest

• Bank Charges

• You may also have a regular management fee for an overdraft and you can be charged separate or one-off fees (such as an arrangement fee when a loan or overdraft is first set up. These fees occur because, usually, the bank has had to analyse whether you can afford to repay the set amount and to do a check on your past credit records)

Interest is linked to credits Financial expenses are related to other banking products

Any time you take out a loan or use a credit card, a lender takes on risk. Imagine lending money to a friend who often forgets to pays back his debts. You'd probably want some extra compensation to justify the risk of lending to such a friend. It is the same with banks and other lenders: there is chance that borrowers will fail to make payments, so they charge fees to make up for the risk. Finance charges and interest rates are closely related terms that describe costs lenders impose on borrowers.

Bank Charges usually small amount paid for the services provided by bank such as issuing LC in favor of account holder, issuing Bank guarantee, issue cheque book, discount LC charge, Balance confirmation, bounce chqs.

entry are DR/Bank Charges- Expenses (P&L)

CR/Bank (Current Asset)

two different type of interest

1- Interest Paid by Account holder for loan- Credit card

  Dr. Interest Paid- Loan ( expense account)

Cr. Bank

2- Interest earning amount credit directly to account holder (Usually for saving account- Invest Account

Dr. Bank

Cr. Interest Earning (Equity)

BANK CHARGE IS SUM OF MONEY CHARGED ON CUSTOMER ACCOUNT FOR SERVICES RENDERED BY THE FINANCIAL INSTITUTION

INTEREST(INTEREST RECEIVED IS AN AMOUNT PAID TO CUSTOMER ON THERE DEPOSIT OR (INTEREST ALLOWED) AN AMOUNT PAID TO THE BANK ON CUSTOMER DEPOSIT