The Big Money:

Has there ever been an industry so relentlessly at war with its customers as the credit card industry is now? Watching new credit card legislation sail through Congress this week is the industry’s reward for giving even its most responsible customers the overwhelming sense that they are getting ripped off. Indeed they are, and there is no more compelling, incontrovertible proof than the flimflammery of “over the limit” charges.

I can actually go one better on “over the limit” charges.

Several years ago, I had a case with my Credit Card Company wherein I missed a $13 payment and had interest charged not just on the missed payment, but the amount I owed after that payment that hadn’t even been put on a statement yet. Unfortunately for me, that was a $4,500 auto repair bill. My interest in the two weeks it took me to get said statement was actually more than the missed payment. I decided then that I was not going to take any chances with credit cards under the assumption that if they can find a way to screw you, they will.

Apparently, my level of paranoia was insufficient. A couple months back I had a credit card bill for $450. I misread what was owed and paid $250. My bad. I realized this mistake a week or so later and paid the additional $200. But the way that the payment on the website was set up, it was still saying that I owed $450 despite the previous payment (which had gone through). Not sure what was going on but not wanting to get screwed, I gave them another $450. Having paid $900 on a $450 statement should put me in the clear, right?

Wrong.

At some point after the billing period, I made a $500 purchase on that same credit card. I hadn’t been billed for it, though as I learned previously that didn’t matter. I get my credit card statement and see that I owe them $50 and am being charged interest on that debt. Despite the fact that I had paid $900 on a $450 statement over a week before it was due. How can this be?

The issue described it as follows: The first payment made on any statement is applied to that statement. Any further payments are applied to the principle and not to that statement. So once my original payment ($250) was made, as far as they were concerned the remainder of what I didn’t pay off ($200) was combined with what hadn’t been billed yet ($500) for a total principle that any future payments (in my case, $200 and $450) would be directed towards. So after my original payment, I owed $700 (though only $200 had been billed to me to date) and the entirety of that amount must be paid before the interest spigot is turned off. As such, $650 I paid was applied towards that amount. And the remaining $50 was counted towards the $200 that I did not pay off with my first payment and thus was considered delinquent and interest-worthy.

According to the customer service agent I talked to, most likely the problem was that the source of this was probably a computer system not set up for people to make multiple payments towards the same statement prior to the statement being due. Had I made the payment the day after it was due, it may have been applied to what I owed them. He actually wasn’t sure. In the future, he said, it would be best to pay the entire amount in one payment or save any subsequent payments until after the due date. Otherwise, if I realize that I have made a mistake, pay off everything I owe (billed or not) because all delinquency ceases when the amount owed equals 0. In truth, the interest I owed them was minimal and after walking me through this the CSA waived it regardless. I guess I can’t even complain about the fact that I spent half an hour on the phone because even after he offered to waive it I insisted that he explain it to me until I understood it.

Even so, avoiding interest payments should not require a half-hour consultation with a customer service agent who has to pepper his statements with “I think” and “I guess” and “I suspect”. Maybe crappy software is to blame, but as long as the crappy software makes it this difficult to avoid being delinquent I doubt it’s something that they’re inclined to fix on their own volition.


Category: Market

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7 Responses to Will Truman, Delinquent

  1. web says:

    Credit card companies do everything in their power to screw the customer – for fees, for interest, for anything else.

    That’s why I’m glad the Credit Card Bill of Rights (which regrettably TOTUS is now going to get credit for signing, despite its having been “in process” and held up by Senate democrats since 2003) finally passed – it’ll outlaw exactly the kind of behavior you described.

  2. ? says:

    The first payment made on any statement is applied . . .

    My head hurts.

    The opportunity to buy things on credit without being charged interest is fairly unique to credit cards. The period between the statement closing date and the payment due date is called in the service agreement a “grace period”, i.e. they’re doing us a favor. If I make a credit card purchase on the first day of the statement period, I can carry that charge for 1 month + grace period = around 50 days interest free! I know it’s aggravating when an “unpaid balance” makes this expectation unrealized, but the credit card company did work with you to remove it.

  3. Kevin says:

    I’m surprised that (i) you were able to talk to someone without spending a half-hour on hold; (ii) the credit card rep’s English was comprehensible; (iii) he understood what you were asking him; and (iv) he provided a comprehensible response.

    I’m cancelling all my credit cards, for reasons like you just described. Credit card companies might just be worse than insurance companies when it comes to screwing people over.

  4. ? says:

    True story: Five years ago I received an offer from my credit card issuer to make a “balance transfer”, with no transfer fee, at 1.9% APY until the balance was paid. The catch was that any additional charges would incur interest at the going rate, and all payments would be first be applied to the balance transfer amount. But there was no requirement to make any additional charges.

    So I called the issuer. “I don’t have any credit card balances, so can I instead transfer money directly to my checking account under these terms?” After a consultation with a manager, the answer came back in the affirmative.

    “Great!” I said. “One more thing: can I increase my credit limit?”

    “Okay. What did you have in mind?”

    “How does $20k sound?”

    I bought a car.

    True story!

  5. Becky says:

    If you can, try to do AMEX. My bill is due on the 1st of every month and I rarely get it in on time and I’ve never been charged a late fee. I always pay off my balance but they now offer payment plans (I use the card for points toward airlines/rewards).

  6. web says:

    American Distress? No thanks. From investigation, they’re sleazier than any other company out there.

  7. trumwill says:

    Phi,

    I prefer debit cards. I don’t like what sudden payments do to my vague accounting. But for a variety of reasons Paypal is hooked up to my credit card and I keep it around so that I can make purchases out of town (any time I do so on my debt card, they cut me off). The fact that people get “free loans” is the road to ruin for a lot of people. They did right by me this time and on a case several years ago they really got me out of a jam. When they could have unloaded a bunch of fees on me for going over my limit or denied payment somewhere, they just upped my limit.

    Kevin,

    I discontinued one of my previous credit cards for putting me on hold for too long. Several years back I called about some service that I had apparently been signed up for. Bu the time I got off the phone, they refunded the previous three months worth of charges for it (I wasn’t looking as closely at that bill as I should have been). But the hour that I was on the phone cost me more than the $6 they refunded to me.

    Becky,

    Does AmEx still charge annual fees?

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