Definition

Noun: 1. The cost of holding or storing a physical asset: This refers to the total expenses incurred by owning and maintaining an asset over a period of time, including storage, insurance, financing costs, and potential depreciation. It represents the opportunity cost of having capital tied up in an unproductive asset. 2. A fee for extending credit: In commerce, this is an additional charge, often interest, added to the price of goods sold on an installment plan or to an outstanding account balance.

Usage Examples

• As a cost of holding an asset:
  • The carrying charge for the unsold inventory includes warehouse fees and insurance premiums.
  • Investors must consider the carrying charge of holding physical gold, such as secure storage costs.
• As a credit fee:
  • The furniture store advertises no carrying charge if the balance is paid within six months.
  • A monthly carrying charge will be applied to any overdue account balance.

Advanced Usage

• In finance and investing: The term is crucial in commodities trading, where the carrying charge (or "cost of carry") includes storage, insurance, and interest costs for holding a physical commodity like oil or grain. The relationship between futures prices and spot prices is often explained by the carrying charge.
• In inventory management: Businesses calculate the carrying charge of inventory to optimize stock levels and minimize the cost of capital tied up in unsold goods.

Variants and Related Words

• Cost of carry: A synonymous term used primarily in finance and commodities trading.
• Carrying cost: A very close synonym, often used interchangeably with "carrying charge."

Synonyms

• Holding cost: (for the asset storage meaning)
• Finance charge: (for the credit fee meaning)
• Interest charge: (for the credit fee meaning)

Related Idioms or Phrases

• To cover the carrying charges: To earn enough return on an asset to pay for the costs of holding it.
  • The rental income from the property barely covers the carrying charges.

Noun

1. the opportunity cost of unproductive assets; the expense incurred by ownership
2. charge made for carrying an account or for merchandise sold on an installment plan