Meaning & use
commitment charge
Last updated
Meaning
nouncountablefinance
A fee charged by a lender for agreeing to make funds available, even if the borrower does not use them.
Grammar: Countable: you can say a commitment charge or commitment charges.
Patterns
- pay a commitment charge
- charge a commitment charge
- a commitment charge on something
The bank added a commitment charge of 0.25 percent on the unused portion of the loan.
Because the company did not draw down the full credit line, it still had to pay a commitment charge.
The contract explains how the commitment charge is calculated each quarter.
Word forms
| plural | commitment charges |
|---|
Common combinations
- pay a commitment charge
- We had to pay a commitment charge even though we never used the credit.
- commitment charge on the unused portion
- The commitment charge on the unused portion is 0.15 percent.
- waive a commitment charge
- The lender agreed to waive the commitment charge for the first year.
- annual commitment charge
- An annual commitment charge applies to the revolving facility.
Synonyms and how they differ
- commitment fee
- Commitment fee is the more common term in everyday business English; commitment charge is often used in legal or loan documents.
Word family
- commit verb
- To agree to do something or to give money or resources.
- commitment noun
- A promise or agreement to do something.
Commonly confused: commitment charge or interest?
commitment charge vs interest
Interest is a charge on money you actually borrow; a commitment charge is a fee for keeping money available even if you do not borrow it.
Practice
The company did not use the credit line, but it still had to pay a _____ on the unused amount.
Choose one answer.
A commitment charge is the exact term for a fee on unused credit. Interest is wrong because it applies to money actually borrowed, not to unused funds.
Make it your own
Write a sentence using “commitment charge”, then check it and compare it with the examples above.