Credit Card Finance Charges

My credit card statement says that finance charges will not be charged on new purchases, as long as the statement balance is paid in full for both the current and last month’s statement. OK, so back in May I paid off most of my balance, but unfortunately had a few dollars carried over. I got hit with high finance charges in June, and I figured, “lesson learned,” and paid $50 MORE than my statement balance in June. In July, once again, I had some finance charges carry over from that May bill, so I again paid $50 more than my balance. Now it’s August, and I STILL have finance charges? Why?

I called the credit card company last month and they assured me that I wouldn’t have finance charges for more than two months, as long as I paid my balance in full. This is so frustrating! Is this some new form of scam? I’ve always paid off my full balance every month, except for last May.

Many credit card companies have a clause in their terms of agreement stating that if you fail to pay your balance in full by the due date, they will charge you interest on the full balance of the unpaid/not fully cleared balance for that month, plus for a specified period thereafter, say 60 days or 90 days, on all charges incurred. So say you are a day late or a dollar short on your bill this month.

You will pay interest on the full balance due (not just the unpaid remainder), and for the next two months, until they “forgive” you, you will pay interest on whatever charges you accrue – though if you pay those in full and on time, the third month you’ll be back to zero interest charges so long as you keep paying off your bill in full and on time.

This is a large part of the magic of why credit card bills are so difficult to pay off – unless you can pay the full balance on time, you will get zinged for interest on principal you already paid down a while back, and this will go on for seemingly forever. Like with smoking, the key is not to start, and to only use a credit card when you can pay the bill in full when it arrives.

If you are a “good customer” (which to credit card companies actually = a “deadbeat customer” because they won’t earn interest from you) who pays off your bills in full and on time as a matter of regular course, you can call your credit card company and say that you didn’t pay the full balance not because you couldn’t, but because your elderly aunt was reading the balance to you over the phone while you were paying online/writing a cheque/whatever you do to pay, and she fumbled up the balance due. This has happened to me with AMEX a couple of times when I missed the due date because I was daydreaming, and when I called them to ask, “Hey, what does this mean – ‘finance charges?’ What are those?” they have refunded the interest charged and put a note on my file so I would not be charged on the two subsequent bills either. YMMV.

I would suggest calling them also. Assuming you are a good customer, they are likely to forgive the charges. You can always take your business elsewhere and they know it.

Their computers likely have a score on you that tells them exactly how valuable a customer you are, and thus what breaks they’re willing to give you.

While I can’t speak for every credit card issuer out there, I can let you know that the several hundred that my company services don’t give us access to any scoring information that they may or may not have for the customer. In making the decision to reverse a fee or finance charge, we first look at the instructions the individual bank has given us as to whether we are allowed to reverse fees at all. If we’re allowed to reverse them, then we look at the account history. How many times has the person paid late, have we reversed fees for them previously, if so how long ago, etc. Generally we have pretty wide latitude in deciding to reverse fees or not, and quite honestly the customer’s attitude toward me plays a huge role in whether I’ll reverse it. If they treat me respectfully then I’ll do it no problem. If they demand it or treat me rudely or unprofessionally, they can go hug a rope.