PSA: Credit Card Hanky Panky

[Lawrencewendall]

I have a credit card with a reputable bank that charges 9.9% interest on new purchases. I transferred money to it under a promotional offer of no transfer fee and 0% interest until November 2018. I calculated how much above and beyond the new purchases was needed to get the transferred money paid off (an additional $500 a pay period) and every 2 weeks would pay off new purchases and the extra $500. I just noticed that the credit card company has been applying the majority of the money to the 0% promotion and NOT the 9.9% amount, incurring interest since August 2017. From everything that I've read, this in violation of the credit Card Act of 2009. Had I not been tracking the payoff date, I might not have caught this. I contacted the bank and it was escalated up 3 levels of managers. A "special team" needs to investigate it. In the meantime I filed a complaint with the Consumer Financial Protection Bureau as it was pointed out that this may not be a fluke with me but how they try to do business. I recommend everyone look hard at their statements for anything amiss.

 

[harley]

Good luck with your complaint. I hope it forces them to change.


Not an issue with me, though. We pay off every card every month. Which makes them all 0% interest cards.

 

[ERD50]

... every 2 weeks would pay off new purchases and the extra $500. I just noticed that the credit card company has been applying the majority of the money to the 0% promotion and NOT the 9.9% amount, incurring interest since August 2017. ...

I don't understand this. If the payment is greater than the purchases, what is the 9.9% amount?

Maybe it sounds like you aren't paying off the new purchases until after the grace period, so you are being charged interest on them, but that doesn't seem to add up with the idea of paying $500 'extra'? I'm confused.

Good luck with your complaint. I hope it forces them to change.


Not an issue with me, though. We pay off every card every month. Which makes them all 0% interest cards.

Yes, I never pay interest (they pay me rewards), so maybe my lack of familiarity has me confused.

-ERD50

 

[Sunset]

We pay off CC in full before they are due each month, so as harley has stated that makes all of them 0%

I always thought with CC, that the 0% amount transferred to a CC would be paid off with a payment first, so the trick with these CC's is to transfer a debt to them, and NOT use them for anything. Of course they also have to start at a balance of $0.

So it sounds to me the bank is doing what I read over the years in the various offers I'd get.

 

[braumeister]

I just noticed that the credit card company has been applying the majority of the money to the 0% promotion and NOT the 9.9% amount

I would be very surprised if their accounting method had not been disclosed in obscure wording in the tiny print agreement they sent when you took advantage of this "offer".

 

[Lawrencewendall]

"6. Highest interest balances paid first: When consumers have accounts that carry different interest rates for different types of purchases (i.e., cash advances, regular purchases, balance transfers or ATM withdrawals), payments in excess of the minimum amount due must go to balances with higher interest rates first. A common practice in the industry had been to apply all amounts over the minimum monthly payments to the lowest-interest balances first -- thus extending the time it takes to pay off higher-interest rate balances."

Credit Card Act of 2009

https://www.creditcards.com/credit-card-news/help/card-act-12-consumer-protections-6000.php

 

[ivinsfan]

I have a credit card with a reputable bank that charges 9.9% interest on new purchases. I transferred money to it under a promotional offer of no transfer fee and 0% interest until November 2018. I calculated how much above and beyond the new purchases was needed to get the transferred money paid off (an additional $500 a pay period) and every 2 weeks would pay off new purchases and the extra $500. I just noticed that the credit card company has been applying the majority of the money to the 0% promotion and NOT the 9.9% amount, incurring interest since August 2017. From everything that I've read, this in violation of the credit Card Act of 2009. Had I not been tracking the payoff date, I might not have caught this. I contacted the bank and it was escalated up 3 levels of managers. A "special team" needs to investigate it. In the meantime I filed a complaint with the Consumer Financial Protection Bureau as it was pointed out that this may not be a fluke with me but how they try to do business. I recommend everyone look hard at their statements for anything amiss.

I don't understand what you are saying if you had a promotion for 0 % and pay all current charges before they came due where does the 9.9 % interest come from?

 

[rodi]

I hope you can get this resolved. From what you quoted of the CC act of 2009 - it sounds like they broke the rules.

This is reason #245 why I pay in full every month. Once you get caught up (debt paid off) it's easy to maintain this. Then the interest rate doesn't matter.

 

[ERD50]

I don't understand this. If the payment is greater than the purchases, what is the 9.9% amount?

-ERD50

I don't understand what you are saying if you had a promotion for 0 % and pay all current charges before they came due where does the 9.9 % interest come from?

That makes two of us! -ERD50

 

[athena53]

Is it possible they're splitting that $500 into the minimum amount due and the remainder, then applying only the minimum amount due to new purchases? That would be in compliance, I think, although it's sleazy.

Example: you have a balance transfer from your old card of $2,000, at zero interest. Your monthly statement shows $300 in new purchases (at 9.6% interest) and a minimum payment of $75. You pay $500 (to go towards the transferred balance) plus $300 to cover the new purchases.

The bank applies $75 to new purchases, the remaining $$825 towards your balance transfer, and voila, you owe 9.6% interest on $225 in new purchases ($300 minus the $75 minimum they applied).

 

[Lawrencewendall]

Is it possible they're splitting that $500 into the minimum amount due and the remainder, then applying only the minimum amount due to new purchases? That would be in compliance, I think, although it's sleazy.

Example: you have a balance transfer from your old card of $2,000, at zero interest. Your monthly statement shows $300 in new purchases (at 9.6% interest) and a minimum payment of $75. You pay $500 (to go towards the transferred balance) plus $300 to cover the new purchases.

The bank applies $75 to new purchases, the remaining $$825 towards your balance transfer, and voila, you owe 9.6% interest on $225 in new purchases ($300 minus the $75 minimum they applied).

I did find in my research that if you only pay minimum, it's at their discretion where to put it. Another good reason to pay more than minimum. In my case, I pay every 2 weeks so there is no minimum.

 

[ERD50]

I did find in my research that if you only pay minimum, it's at their discretion where to put it. Another good reason to pay more than minimum. In my case, I pay every 2 weeks so there is no minimum.

I think you need to provide actual numbers if you want any help from this group. The explanation from athena53 makes sense to me.

I'm not sure how paying every two weeks fits into anything. The only way I know of to not have a minimum due at closing is to not have a balance. If there is no balance, what can they be charging 9.9% on?

Not making sense to me. Something is missing - like examples.

-ERD50

 

[Lawrencewendall]

I'll use round numbers and whole months.

No new purchase balance carried forward into September.
10k promotional offer at 0%
4k new purchases spread throughout the month
(2) 2.5k payments. (12th and 26th).
Instead of 4k being applied to the new purchases and the remaining 1k against the promotional, they put 2k against the new purchases and the remaining 3k on the promotional.
I now owe interest on the 2k remaining new purchases.
Clear as mud?

They actually started this back in August and each month there is higher balance on the new purchases each month and less balance on the promotional even though I've actually paid over 5k more than new purchases during the same time period.

 

[ivinsfan]

I think your problem is the 2 monthly payments.. and the fact you sent them 5k whe n you had no minimum payment due..why are you doing it this way. It's confusing Youre expecting them to treat your account Like A checking account.

 

[ERD50]

I think your problem is the 2 monthly payments.. and the fact you sent them 5k whe n you had no minimum payment due..why are you doing it this way. It's confusing Youre expecting them to treat your account Like A checking account.

Yes, needlessly complex. Maybe you (the OP) don't have a full $2.5K in new purchases at the time you make the $2.5K payment? So what are they supposed to do with it?

Geez, follow the KISS principle. Get your closing statement, and between the close and the due date, pay the full new purchase balance and whatever you want towards the transferred debt. Set it up in electronic bill pay so you can be sure it gets there in time, don;t trust snail-mail and delays/loss.

(2) 2.5k payments. (12th and 26th).

When are the closing and due dates?

-ERD50

 

[Lawrencewendall]

Credit cards are compounded daily so every day, 1/365 of annual interest rate is applied to the balance. For every payment I make, it's 2 weeks of interest I save.

 

[ERD50]

Credit cards are compounded daily so every day, 1/365 of annual interest rate is applied to the balance. For every payment I make, it's 2 weeks of interest I save.

Hmmmm, I pay my balance in full, there is no interest, it all in the 'grace period'. I'm lost.

Ah-hah! OK, since you transferred a balance, there is always a balance, so no 'grace period'. Well heck, they are going to charge you interest! How they go about it is going to be confusing, who knows?

Do the KISS principle. I think someone else mentioned, use a different card for new purchases, and just use this one to pay down the transferred debt at 0%. Or (I bet they do) are there other 'catches' that you have to spend $X amount on the card?

Whatever, get the CC debt paid off, and never incur CC debt again. It's lousy debt. Now, a low interest rate mortgage, that's different

-ERD50

 

[ivinsfan]

Credit cards are compounded daily so every day, 1/365 of annual interest rate is applied to the balance. For every payment I make, it's 2 weeks of interest I save.

You just explained you don't owe any interest..so what exactly are you saving

 

[Just_Steve]

Never commingle your balance transfer card with your everyday card.

 

[ivinsfan]

Never commingle your balance transfer card with your everyday card.

+1 I'll go you one better and say if you don't even have a balance to transfer you won't have to mess with the 0% transfer offer.

 

[Scuba]

Never commingle your balance transfer card with your everyday card.

+1
Credit card debt can be good debt too if it's zero interest and you are very diligent about paying it off before the promo period ends. We have been using a zero percent card for some purchases this year, which has allowed us to keep cash invested in the market earning double digit returns. Obviously this is only a prudent strategy if one can afford to pay the balance off and one isn't 100% in equities.

I also would advocate never mixing a "balance transfer" card with a "new purchases" card. There are so many zero percent offers out there that it isn't worth comingling and running into the OP's issue.

 

[scrabbler1]

+1
Credit card debt can be good debt too if it's zero interest and you are very diligent about paying it off before the promo period ends. We have been using a zero percent card for some purchases this year, which has allowed us to keep cash invested in the market earning double digit returns. Obviously this is only a prudent strategy if one can afford to pay the balance off and one isn't 100% in equities.

I also would advocate never mixing a "balance transfer" card with a "new purchases" card. There are so many zero percent offers out there that it isn't worth comingling and running into the OP's issue.

One time, back in the 1990s, I opened a store charge card as part of a promotion when I bought the first of 3 costly electronics items. It was a 0% interest deal and I could delay repayment for 90 days on each item. But the 90-day grace period overlapped across the 3 items so 2 or 3 of them appeared on one monthly statement. I had to make sure I paid the proper amount to avoid getting dinged with interest and to needlessly avoid repaying too much. I also had to check the fine print in the monthly statement to make sure that any partial payment toward the entire balance would apply to the older purchases first (it did) so I wouldn't get dinged with interest that way.

 

[CaptTom]

First, I'm no lawyer, but I have learned not to assume my reading of a law is correct. You can quote the exact wording which clearly supports your position, but miss a different section (or a different law) which states that first section doesn't apply to you.

To those who say never to carry a CC balance, that's true, but life doesn't always allow us that flexibility. I used CC debt to save my skin a number of times (messy divorce, raising kids as a single parent, long story.) I hope to never go there again!

But even if you have to carry debt, you can be smart about it. There are lots of ways to minimize interest payments. Keep your credit score reasonable and you'll get all kinds of promotional deals right in your mail box. Know how they work and make them work for you instead of against you.

This is a good discussion and will no doubt help someone make an better decision. Thanks to the OP for opening the thread.

 

[jazz4cash]

In the past I learned to never use a balance xfer card for purchases, but now I have 3 accounts with mixed balances with no issues. I guess it is due to the CC Act cited. A credit union Visa, PayPal, and Home Depot (chase). Papal and Chase do an excellent job of detailing each promo balance. I still check carefully every month to see how extra payments are applied. It ain't easy being a deadbeat!