Is this normal for credit card interest?

[bjscheel]

At work, I accidentally underpaid the April credit card statement by $10. The balance was $2950, and I paid $2940. Then the May statement had $33 interest on it! I questioned Chase online and they explained how they calculate interest and daily balances, etc., but I still didn't get why the interest was being calculated on $3405, when only $10 was not paid. For the May statement, I paid more than the balance, because there were some client advances after the billing cut off that we wanted paid. On the June statement, I still had $12 interest. I questioned Chase again and apparently it is still carryover "residual interest" from that underpayment and going forward, we won't have any interest if it is paid in full.

Does this seem right to charge $43 on $10 underpayment? Am I incorrect in thinking it should only be calculated on the unpaid amount? Or do cc's normally charge interest on the whole amount when it's not quite paid in full?

 

[crisi]

Yes, pay in full or the whole thing accrues interest.

 

[bjscheel]

Okay, thanks.

 

[supersnoop]

And, since you didn't pay in full for that month, the next month does not have any grace period for interest. You have to pay in full for two months straight before the interest goes away.

 

[Jen and Ashwin]

And, since you didn't pay in full for that month, the next month does not have any grace period for interest. You have to pay in full for two months straight before the interest goes away.

So the lesson of this story is, pay in full.

 

[mistysue]

It's not just paying in full that stops it, I have had to pay it so I had a current balance of zero- as in overpaid it up to date online, not just up to statement balance, before interest accrual stops. Also if you have a promotional 0% balance, if you use the card for anything else it immediately starts accruing interest... We did a home addition and I was financing it at 0%- because of that detail my 0% financing cost me more than the home equity loan would have.

 

[Jen and Ashwin]

It's not just paying in full that stops it, I have had to pay it so I had a current balance of zero- as in overpaid it up to date online, not just up to statement balance, before interest accrual stops. Also if you have a promotional 0% balance, if you use the card for anything else it immediately starts accruing interest... We did a home addition and I was financing it at 0%- because of that detail my 0% financing cost me more than the home equity loan would have.

This isn't true. I have had several cards with a 0% promotional balance. When I charge other items, I just pay the statement balance and don't incur interest charges. On other cards I also just pay the statement balance, not the current balance and I have never paid interest on any credit card, ever.

 

[mistysue]

This isn't true. I have had several cards with a 0% promotional balance. When I charge other items, I just pay the statement balance and don't incur interest charges. On other cards I also just pay the statement balance, not the current balance and I have never paid interest on any credit card, ever.

Must be card specific- what you are describing is what I expected. I charged a couple items- overpaid the non-promotional balance and accrued interest.

The thing with having to overpay only happens once you START accruing interest. If for any reason something isn't paid in full for one statement and interest starts, they keep paying interest until you get the balance down to zero. The catch if is you have a $0 balance, they can go back and apply the interest as it would have calculated to that date- so now your $0 balance was really $3.42 or whatever... so it was never down to $0 and joke's on you, you get to still pay interest!

 

[leebee]

I almost did the same thing this morning- almost underwrote the check by $10. The only other time that happened to me, I called Chase and asked them to waive the fee/remove the interest and they did it. Not sure they'd do it again, but I was happy that time.

 

[supersnoop]

This isn't true. I have had several cards with a 0% promotional balance. When I charge other items, I just pay the statement balance and don't incur interest charges. On other cards I also just pay the statement balance, not the current balance and I have never paid interest on any credit card, ever.

I'm curious what card you had where this happened. Every card I've every use was very clear that carrying any balance, even a 0% promotional balance, waived the grace period for interest on new purchases.

 

[shoney]

just call them explain what happened and as long as you are a good customer they will credit your account. just pay the $10.

I only pay online...you just click the button...no mistakes.

 

[Jen and Ashwin]

I'm curious what card you had where this happened. Every card I've every use was very clear that carrying any balance, even a 0% promotional balance, waived the grace period for interest on new purchases.

I think it matters whether the 0% promotion is for the entire card or if it is a balance transfer promotional rate. If it is a balance transfer, then this is correct, it would waive the grace period and new charges would accrue interest. I have only used a balance transfer once. The first month that the charges hit, I paid everything that was outstanding on the card (minus the balance transfer subject to 0%), plus the minimum payment and did not incur interest charges. I added the minimum payment on top because most cards apply the minimum payment amount to the lowest APR and then apply the excess to higher APR balances.

So let's say you have $1000 on a credit card and take out a balance transfer of $4500 at 0% for 12 months. The balance transfer fee is 4%. So basically your balance on the next bill would be $1000 + $4500 + $180. The balance is $5680 and the minimum payment is say $56. In order to avoid interest on this card, you would want to make a payment of $1000 + $180 + $56 or $1236.

The first $56 gets applied to the $4500. And the remaining $1180 gets applied to the higher APR balance, bringing it to $0 for the higher APR and $4444 for the 0% balance. If you don't add in that extra $56, then the first $56 would get applied to the $4500 and the remaining $1124 gets applied to the higher APR balance, but you would still have $56 left of the higher APR balance and would be hit with interest on this amount.

 

[supersnoop]

I think it matters whether the 0% promotion is for the entire card or if it is a balance transfer promotional rate. If it is a balance transfer, then this is correct, it would waive the grace period and new charges would accrue interest. I have only used a balance transfer once. The first month that the charges hit, I paid everything that was outstanding on the card (minus the balance transfer subject to 0%), plus the minimum payment and did not incur interest charges. I added the minimum payment on top because most cards apply the minimum payment amount to the lowest APR and then apply the excess to higher APR balances.

So let's say you have $1000 on a credit card and take out a balance transfer of $4500 at 0% for 12 months. The balance transfer fee is 4%. So basically your balance on the next bill would be $1000 + $4500 + $180. The balance is $5680 and the minimum payment is say $56. In order to avoid interest on this card, you would want to make a payment of $1000 + $180 + $56 or $1236.

The first $56 gets applied to the $4500. And the remaining $1180 gets applied to the higher APR balance, bringing it to $0 for the higher APR and $4444 for the 0% balance. If you don't add in that extra $56, then the first $56 would get applied to the $4500 and the remaining $1124 gets applied to the higher APR balance, but you would still have $56 left of the higher APR balance and would be hit with interest on this amount.

I believe federal law now requires banks to apply payments to the highest rate balance first.

 

[JWigs]

Cap one did the same thing to me a few months ago. I called and tossed a fit and they reversed the 2nd months interest charges. I'd try that as it is silly to me to pay for both months.

 

[GreatLakes]

If you pay online and just select the option to pay the statement balance you don't have to worry about accidentally paying the wrong amount.

 

[Jen and Ashwin]

I believe federal law now requires banks to apply payments to the highest rate balance first.

Nope. I read my statement and it says that the minimum payment amount is applied to the lowest APR balance and any excess is applied to the highest APR. My credit card terms on my statement from this month read,

"Payments are allocated to posted balances. If your account has balances with different APRs, we will allocate the amount of your payment equal to the Total Minimum Payment Due to the lowest APR balances first (including transactions made after this statement). Payment amounts in excess of your Total Minimum Payment Due will be applied to balances with higher APRs before balances with lower APRs."

 

[supersnoop]

Nope. I read my statement and it says that the minimum payment amount is applied to the lowest APR balance and any excess is applied to the highest APR. My credit card terms on my statement from this month read,

"Payments are allocated to posted balances. If your account has balances with different APRs, we will allocate the amount of your payment equal to the Total Minimum Payment Due to the lowest APR balances first (including transactions made after this statement). Payment amounts in excess of your Total Minimum Payment Due will be applied to balances with higher APRs before balances with lower APRs."

Seems to be a violation.

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

 

[Kaytie]

Cap one did the same thing to me a few months ago. I called and tossed a fit and they reversed the 2nd months interest charges. I'd try that as it is silly to me to pay for both months.

Tossing a fit to a customer service rep who has zero effect on the card's terms of interest accrual because the cardholder thinks the card's are silly might not be the ideal reaction.

edited to correct one minor and one nonsensical error

 

[Shanti]

This is one of the many reasons why I avoid using credit cards.

 

[msb578]

With the Chase Disney Premier, I was able to carry the 0% promotional balance without getting hit with any interest on the rest of the balance.