Utilization Fee

Posted in Finance, Accounting and Economics Terms, Total Reads: 398
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Definition: Utilization Fee

Utilization Fee is the term used for the charge that is associated with the use of a line of credit. It is the annual fee that is received by a lender from the borrower. The term utilization fee is also used for describing the fee charged when using a service, resource or facility.


The service provider is required to disclose the amount of the fee that is associated with the service provided and the customers must be notified in case there is any change that has to be made in the fee as these changes might affect the customer’s accounts.


In credit parlance, utilization fee is used for a fee charged by the bank to its borrowers. It is in accordance to the percentage of the credit given by the bank on a revolving line that is utilized by the borrower throughout the accounting period. The fee charged varies according to the terms and conditions agreed by the borrower and can increase if the credit is used more heavily by the borrowers. The banks are required to provide information to their customers about how the calculation for the utilization fee was done thus providing customers the information to dispute it in case the terms are not met.

 

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