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Important note: Despite what the credit card company told me, and despite my own mis-information, this story below apparently does NOT relate to two-cycle billing. Instead, my frustration stems from the way some credit card companies handle their grace periods. Thanks for all of the commenters who pointed out the error. Here’s a follow-up to this situation.
For almost a decade, I refused to use a personal credit card. I knew that I couldn’t control myself, so rather than risk falling further into debt, the only plastic I carried was a debit card.
But as I gained control of my finances, I decided that carrying a credit card could be both convenient and profitable. I signed up a for a Capital One No-Hassle Cash Rewards card that gave me 1% cash back on all of my purchases. And I developed an iron-clad set of rules to make sure I never lost control of my spending again:
- I pay my bill in full every month. I never carry a balance.
- I do not use the credit card to pay for frivolous stuff. No comic books, no videogames, no junk food. If it’s an indulgence, I pay for it with cash.
- If I do not already have the cash for the item I am purchasing, I do not buy it on credit. If I could not pay with cash, I do not pay with plastic. When I first returned to the world of credit, I even had a “buffer account” in Quicken that I used to immediately pull money from my checking account and prepare for the credit card bill. I don’t need that anymore, but I still follow this rule.
By using these three rules, I’ve been able to steer clear of credit problems for the past two years. I pay for whatever I can with my credit card, which earns me 1% cash back. So far, I have accumulated $489.32 in cash rewards. This can all be used for our trip to France next year:
The $25 Typo
But in order for credit cards to be tools of convenience rather than links in the chains of slavery, you must use them wisely and play by the rules. And you can’t make stupid mistakes.
At the beginning of every month, I pay my credit card bill online. I login to the Capital One website and I make a transfer from my credit union account in the full amount of my “new balance”. Because I pay my account in full, I never pay a finance charge.
But when I was doing my finances last month, I couldn’t get my credit card balance to work out right. I entered and re-entered my transactions, and then compared them with the transactions listed on the bank’s website, and things just wouldn’t add up. The bank showed that I owed an additional $12.22. I couldn’t find a receipt for a $12.22 charge.
In the end, I gave up and created a dummy transaction for $12.22. I hated to do it, but it was just a small thing, and I figured I’d find the problem eventually.
Last week, I did this month’s finances. Again the credit card balances didn’t match. This time the bank said I owed $12.42 more than I thought I did. I went over the ledgers repeatedly and couldn’t make things work. Finally I decided to download the actual PDF statements to see if I could spot the problem. I found it immediately. Can you? Here’s my June statement:
Oops. Call me Mr. Butterfingers.
Apparently when I paid my bill in early June, I didn’t type $2622.11 into the payment box. I typed $2522.11. As a result, I carried a $100 balance over to the next month. Worse, I triggered a finance charge on the entire amount. But what about the next month’s statement? Look at this:
At the beginning of July, I paid the full amount the credit card company said I owed them, including the finance charge. (Though I didn’t realize I was paying a finance charge at the time, remember.) But even though I paid the full amount, I was still assessed a finance charge on the next statement. Why? I was baffled.
Hello, Two-Cycle Billing!
After I whined about this on Twitter, several astute readers gave me the same advice I would give anyone else: Call the credit card company and ask them what’s up. Ask them to waive the fee. So I did.
Because I get nervous about this sort of thing (seriously), I wrote out what I wanted to say in advance. That helped a little. Here’s how the conversation went:
J.D.: Hi. I’m confused and hope you can explain something for me. On my bill dated June 27th, I had a balance of $2062.34. I paid the full balance of $2062.34. But on my July 27th bill, still received a $12.42 finance charge. Can you explain this for me?
Capital One: Please hold a moment, sir, while I verify the information. Yes, I see that you paid $2062.34 and now owe $1312.12. If you pay the full $1312.12, you will not receive a finance charge on your next statement. Your finance charge of $12.42 was based on the average daily balance over two billing cycles [blah blah blah]…
J.D.: So this is two-cycle billing?
Capital One: Yes, sir, it is.
J.D.: (cringing, because I hate this sort of thing) Would it be possible to waive this $12.42 finance charge? As you can see, I use the card frequently and always pay my bills on time.
Capital One: No sir, I’m afraid that is not possible.
J.D.: Okaythanksbye.
So now I have first-hand experience with two-cycle billing. There’s a reason it’s called two-cycle billing. You’re charged interest over two billing cycles. The month after you pay off your credit card balance, you still owe a finance charge. You’re only free of finance charges after you’ve paid the balance in full for two consecutive months. (For more info, check out JLP’s article on how two-cycle billing works.)
Lessons Learned
Depending on who you are, I suppose there are a lot of lessons you could take away from this. You might decide credit card companies are evil and that you don’t want to carry credit cards at all. You might decide that it pays to be more assertive when dealing with bank reps on the phone. (I’ll bet Ramit would have managed to get that $12.42 finance charge waived!)
But the lesson I learned is this: I need to be more careful. I need to double-check my statements, and I need to double-check the numbers I’m entering on the computer.
In the end, my carelessness cost me $24.64. That’s not the end of the world, of course, but it is roughly the cost of another comic book compilation. I think I’d rather have the comic books than the finance charge.
Note: As mentioned in the intro, this isn’t actually two-cycle billing, despite what the customer service rep told me. Here’s a follow-up on this situation.
This article is about Basics, Credit Cards, Real-Life Tuesday, 18th August 2009 (by J.D. Roth)
August 18th, 2009 at 5:09 am
J.D., I wouldn’t beat yourself up about this, its a $25 mistake and I’m sure you won’t make that mistake again.
We are not a credit card family, although we do use credit for travel and for business expenses (we have $1400 sitting on a 0% Home Depot card related to one of investment properties), and I don’t think credit is evil but I would never go back to using credit for my day to day spending. Why? because I spent twice as much (even though I paid it off in full, blah, blah, blah) as I do now using debit. So since I know you use a spending plan (like we do) I wonder how you keep your day to day credit spending under control.
August 18th, 2009 at 5:15 am
I could say credit card companies are evil and I will never use one again. But then … how would I pay for that much needed vacation to the Bahamas that I have been saving and planning for? Last time I checked ( a month ago ) no airline or travel agent takes a debit card for payment and paying with cash or a check is sure to raise the suspicion of one or two federal agencies.
August 18th, 2009 at 5:18 am
Ramit’s gonna slap you around next time he sees you
August 18th, 2009 at 5:20 am
JD, I use a Chase credit card for the same reason you do, and their website has an option to “pay statement balance”, which keeps me from having typos. I also download all my transactions into Quicken to categorize them so if there’s any funny business like upcharges I’ll see them.
August 18th, 2009 at 5:26 am
Sam is right - stop beating yourself up. Consider the $25.00 the cost of an “education” on two-cycle billing and know that you have learned your lesson well.
August 18th, 2009 at 5:31 am
I have two credit cards. The first one was issued by my bank (BofA) and I have it set to automatically withdraw the whole balance a day or two before the bill is due, so all I have to do is make sure I have enough funds in my checking account to cover the bill.
My second card is from another bank and offers cashback rewards. My online banking won’t allow me to set up an automatic payment to pay the whole balance, so I have to do it myself every month. But it does give me options: Pay the minimum payment, pay the whole balance, or pay [fill in amount].
I’ve managed to avoid typos using these systems.
August 18th, 2009 at 5:31 am
You should consider signing up for your card’s autopay program if they offer it. All of my credit cards are enrolled in autopay, which means that on the day of the due date, my balace is automatically paid in full. All done by computers, so there’s no risk of typos or late payments.
Of course, you still have to keep an eye on the balance to make sure your bank account will be able to handle the auto-withdrawl, but if your spending is under your control, then it shouldn’t be a problem.
August 18th, 2009 at 5:33 am
don’t worry…soon the two cycle billing will be a thing of the past.
August 18th, 2009 at 5:39 am
I don’t know if this is possible in the states, but here in the UK, we have a thing called Direct Debit. It is a way of allowing creditors to collect money directly from your bank account. Obviously, you have to be careful (do you trust the company? will you always have enough money in the account to avoid going overdrawn?), but there are some safeguards built in, and it’s generally a pretty safe thing if you’re dealing with a reputable company. Anyway, I have mine set up to pay off my credit card bills in full every month, so that I avoid making any mistakes like that.
You still have to make the effort to check the accounts for fraudulent activity of course, but that’s easy for me, as most months I don’t use the cards at all - I keep them for large purchases where I want the consumer protection. Otherwise I use cash or debit.
August 18th, 2009 at 5:45 am
I would’ve been ready to cancel the card. If you don’t like two cycle billing, cancel your account and go somewhere else with single cycle billing. I know it might be bad for your credit score, but there are worse things in life, and if you said you were going to cancel (and have been ready to) I bet you would’ve got that fee waived.
August 18th, 2009 at 5:53 am
SF_UK: Yes, this is common in the US as well.
So, JD: if you don’t carry a balance, why don’t you do that (have your credit card balance auto-debited in full each month)? Ramit would beat you up more over not having that bit of automation in place than failing to negotiate your way out of the finance charge, I think.
August 18th, 2009 at 5:55 am
I would agree with Adam, I’ve threatened cancellation just because they wouldn’t waive a fee. Remember, you’re granting them your business and not the other way around. Even if you’re paying on time each and every month, they get to charge all of the stores out there little chunks of dough on each transaction.
It is commendable to call and ask for reductions on just about anything, a lot of people won’t do that and I think you should encourage more readers to do so. I once went $300 over on my cell phone bill, a true fluke, due to the fact that my real estate agent was calling a ton when I bought my first house and wasn’t on the same plan as me (free in network calling and such). I called them up said “Look, I’ve been a customer for 5 years, always paid on time, can you help me out?” And they did. All of the charges were wiped out. They lose $300 but gain the respect of a customer that always pays his bills.
August 18th, 2009 at 6:01 am
JD,
I would actually consider calling back and trying again. If you talked with the first person you spoke to, you DID NOT speak with a supervisor. Most of these credit card companies don’t keep track of the fact that you asked for a fee to be waved (like they don’t write it in their notes when you ask). I have on many occasions been denied a fee removal only to hang up and call again - ask for a supervisor - and get the fees removed.
Especially since you are such a good customer, I feel like a supervisor would remove the fees. On your downtime give it another shot (please!). I want to read tomorrow that you managed to get those fees removed!!!!!!!!!
August 18th, 2009 at 6:10 am
Another lesson you can learn is that if you do make this sort of mistake and have two-cycle billing, don’t make any more charges on your card until the end of the next cycle and pay off the entire amount you have charged rather than just the amount you’re being billed in order to reduce the interest you are charged.
Concerning the evilness of credit card companies, I know my rewards card comes with lots of evil policies like this one. I vow never to let them hit me with fees, though I sometimes do. (After the second time, I told myself that if they get me a third time, I’ll cancel.) I’m afraid I would never, ever trust them to automatically deduct anything from my bank.
(I also hate begging strangers for favors, like to explain something or waive a fee.)
August 18th, 2009 at 6:13 am
Although automatic balance payments are more comfortable, they might make you less likely to check carefully your monthly statements (and spot problems). That’s why I avoid them (yeah, I’m a bit paranoid).
What I do to avoid the kind of problem you ran into is to pay a bit more than what I owe, say 1,000 if my balance is 984. It’s a small fee to pay for security and peace of mind and it’s going as credit on your next balance anyway.
August 18th, 2009 at 6:18 am
@ J.D. - if I were you, I would call back and ask to speak to a supervisor, asking them to waive one of the $12.42 charges because you didn’t know about two cycle billing. (heck, that’s a new one to me). I realize that $12.42 isn’t much, but it’s the principle of the thing, and I know that USAA would waive one of those fees, this first time, if I called them. (don’t know if they do two cycle billing though). Besides, $12.42 will get you and your wife a nice lunch somewhere.
@ Sam - From my experience of doing the cash/envelope system, I know for a fact that I was spending twice as much, and more, using my credit card before, for living expenses, even though I maintained a 0 balance, so I don’t do that anymore.
@ Khurt — I booked two trips with American Airlines last week and they do accept debit cards. It’s worth a call to your airlines to see if they’ve changed their policies. (Dave Ramsey has gone on record saying that he travels all over the country, numerous times for speaking engagements and puts it all on his debit card).
August 18th, 2009 at 6:21 am
Or you can go for a card that will debit your checking account (or whatever account) automatically on the due date for the full balance. I know not all banks (in the US) will do this (I guess because it makes it too easy to not screw up like you did) but its nice to not every worry about a CC payment.
-M
August 18th, 2009 at 6:24 am
That’s the reason why I don’t use CapitalOne credit cards anymore. Not because of two cycle billing, but crappy customer service.
Couple years back, I’ve accidentally paid $20 less than my due amount on my cash rebate american express card. I’ve noticed mistake immediatly, but was lazy to send second payment and thought I have credit (for something I returned) will cover this 20. nope, it didn’t.
When I received first statement I accepted finance charge, but when second statement arrived, I was surprised. Called customer service and rep explained me everything and offered to refund finance fees. I didn’t ask. I refused - it was a way to punish myself for laziness.
Now I pay everything on time and in full. Unless there is 0% for some period on cards like Home Depot or Lowes.
August 18th, 2009 at 6:28 am
I’ve found that negotiating with credit card companies (and most other big businesses) is like that scene from Austin Powers where they capture the guy and interrogate him, finding that all they have to do to get the answer they’re looking for is ask 3 times. The first two times the captive is rude and refuses to answer, but just can’t stand to be asked the same question 3 times so always answers on the third try.
It’s counterintuitive, but it actually does work many times.
August 18th, 2009 at 6:30 am
I wouldn’t try to get the fee waived. They didn’t do anything wrong. You made a mistake, and mistakes have consequences - a fundamental lesson of life. Yes, the credit card companies get to make the rules, and the rules are full of tricks and loopholes, but still - you’re playing THEIR game, and they got you this one time.
How would you feel if they called you up and said, “Mr. Roth, we’ve been serving you for many years now, and I know you’ve accumulated $489.32 in cash rewards, but we were expecting to make a lot more interest off you. Would you mind terribly if we just revoked those cash rewards, this one time?”
Look at it as a lesson. If it really burns you that much, you can just quit playing their game. But if you choose to keep playing the game, you have to accept that every now and then, they might get a “point” on you.
Besides, it gave you great fodder for a blog post, which I’m guessing has already generated far more than $25 in adsense revenue for you.
August 18th, 2009 at 6:31 am
I agree with Sam, in the sense that you’ll never make that mistake again! In the grand scheme of things, $25 to learn a lesson like that could be considered worth it. On the other hand, I’d rather have some manga than a finance charge too!
EDIT: the images in this post are not in the RSS feed today!
August 18th, 2009 at 6:40 am
What a timely post. The first part of the new credit card legislation goes into effect Thursday. For those of us who still use credit cards - here is where you go to find out what you need to know: http://www.consumer-action.org/alerts/articles/new_credit_card_provisions/
August 18th, 2009 at 6:48 am
wow, I hadn’t heard of two-cycle billing. I wonder if this is just something in the states or if it is in Canada too.
August 18th, 2009 at 6:51 am
“At the beginning of every month, I pay my credit card bill online. I login to the Capital One website and I make a transfer from my credit union account in the full amount of my “new balance”.”
J.D., it sounds like you’re paying through Capital One’s site. When you log in to Capital One to pay your credit card, there should be four radio buttons: the minimum amount, the statement balance, the current balance, or another amount that you type in. Always choose the “statement balance” radio button and you will always pay your statement in full, no typing required.
August 18th, 2009 at 6:55 am
Call back again. It doesn’t matter whether it was your mistake or not. Say “I know it was my mistake, but I would like the finance charges waived as a courtesy.” If they refuse, tell them that you are considering putting their card in a drawer and using another card.
You need to have leverage though. Pay your card to $0 and quit using it. If they quit making money on the card, they will have an incentive to deal. So pay the full balance to $0 today, and call them up asking for the fees to be waived. If you give them the right incentive and are persistent, I suspect you will succeed.
I have never failed to get a finance charge reversed or shrunk.
August 18th, 2009 at 6:58 am
I don’t know that it’s worth calling back. But in the future when dealing with random companies, the technique that works best for me is to politely and flatly STATE the following:
“I’m going to need you to waive that interest/fee/installation charge/one-time cost.”
And then just remain silent…
Even if they can’t, they will often get uncomfortable and offer something else (we can’t do that, but we can give you a loyalty discount off your next two bills).
Don’t ask, just tell them what you need.
August 18th, 2009 at 6:59 am
J.D. - You should drop the credit cards. Profiting from their practices, e.g. getting cash back, only encourages them to perpetuate their unethical practices and exploitation they use to maintain profitability. Remember credit card companies get paid twice, once by the retailer and then again by the consumer. The money you get in rewards is a lure to get you to market the cards to people who are less responsible than yourself. Do you really want to be a part of that industry? If you can pay for things with cash, then do so. By deferring non-essential expenses by 30 days and placing the money in a high yield account you can get the better earnings than you are with cash back. And, it’s money not earned by exploiting someone trying to get by.
August 18th, 2009 at 7:02 am
Definitely call back and threaten to cancel if they don’t credit back the charges.
Like Anne said, there should be an option to pay the entire statement balance; there is with my American Express card.
By the way, I thought that you used Mint - why Quicken?
August 18th, 2009 at 7:12 am
I’ve done that. Back in the day, I *did* call immediately and ask for the interest to be removed. And they did.*
A few months ago, I was ONE day late paying my bill electronically. Ouch, fee! Ouch, interest! Well, actually, I minimized the double-cycle billing pain by immediately paying off the entire balance outstanding on the card, not just the amount due.
*I didn’t call about my lateness this time, because I’ve heard so much about credit being tightened — I was afraid that a “I’d like to close my account if you don’t remove the charge” would be met with “OK.” (!?!) Has anyone tried this bluff lately?
August 18th, 2009 at 7:13 am
$25 is well more (after taxes and other deductions) than an hour’s pay for me. I would eagerly spend a half-hour or more to get the fee waived.
Like others have said, call back and speak to a supervisor. Tell them you are prepared to take your business elsewhere if they cannot waive the fees. Try for both and accept just one.
August 18th, 2009 at 7:13 am
Yikes!
When I started reading your post I was thinking “Well gee, isn’t it common sense that the best way to use a credit card is to pay the full balance each month?” but then you got into the two-cycle billing and I am quite surprised to learn of yet another trick that card companies use to pocket money.
The last “trick” I learned is that if you carry a balance, all new charges INSTANTLY accrue interest - no grace period… I was not aware of this before.
Thanks for opening my eyes to yet another thing card companies do. It’s sad that even when you make a small mistake you get dinged twice! It really adds up. Yes, the onus is on you to be more vigilant, but I don’t agree with this two-cycle thing. It just seems like overkill, punishing you twice.
I agree with the comments here that suggest you should just set up an auto payment. I know I can set up an auto deduction from my chequing to my credit card - either the minimum or the full amount. If you always have money to cover the expense anyway, this should be ideal for you.
Thanks for the good post.
August 18th, 2009 at 7:17 am
I hate when I make little mistakes like this with tangible consequences. Nothing more frustrating than human error getting in the way of planning and hard work. Go ahead and kick yourself for two or three minutes, then realize all the bullets you’ve dodged because you were a good planner and leave it behind.
August 18th, 2009 at 7:18 am
OMG! I love this post. I am a debit card holder as well. I have NO credit cards. I am trying to repair my credit and having a credit card just didnt make sense to me. I thought it would hurt me more than help me, because it would just be one extra bill to pay. However, since opening up a new savings account (aside from my main checking/savings acct) with a new bank, I have decided to get a secured credit card. (1) To build my relationship with the new bank (2) To get some kind of revolving credit back on my report. Although being a little skeptical about doing so, reading your article helped and now I know I can still get the credit card just have to be wise about the purchases I make.
August 18th, 2009 at 7:20 am
JD,
I think your biggest mistake in this call was not mentioning that (a) You always pay off your balance and (b) it is clear that the only reason you didn’t pay off the balance this time was due to a typo. Your payment history should be worth a reduction or elimination of the extra charges.
Also, you don’t make it clear where that $489 is sitting. Have you not yet redeemed it? It’s not earning interest as long as the bank is still holding it…
August 18th, 2009 at 7:22 am
Thanks for the heads-up; I’ll be more careful paying off my balance in future. We can all learn from this lesson.
But JD, I want to add my voice to those above– you can get this fee removed. Every bank I’ve dealt with actually has an allotment for each customer of fee waivers that they will grant if asked. I don’t know if Capital One is the same, but it’s a safe bet. I’d suggest calling back and spending 15 minutes trying to talk your way into it. If you succeed, you’ll get your money back at $100/hour worth of effort. If you fail, hey, it’s just 15 minutes, and it’ll be good experience.
August 18th, 2009 at 7:22 am
Maybe don’t set up the auto-payment to pay in full (what if an erroneous charge for $10,000 came in?), but at least set it to pay the minimum automatically. That way, you’ll never incur a late fee - even if you’re on the beach in Bali and forgot the due date.
I have every single bill automatically paid each month. I still get the statements and check them carefully in advance of the automatic payments, but I don’t have to take any action to get my bills paid.
Yes, I pay my cards in full each month, and yes, I collect $600-800 per year in cash back rewards from American Express Blue Cash.
Some of the comments got me thinking though. I think I’m so smart to get that cash back, but, would I save more than $600-800 per year if I went back to debit card (by not spending as much)? Hmmm… I’ll have to consider that one. I could save more, perhaps, but I’d have to spend less. Immediate plus some deferred gratification, or, all deferred gratification. Which is more balanced?
August 18th, 2009 at 7:24 am
I am surprised that your account has not been flagged because you are a famous finance blogger. Please let us know if you get a call from the VP of smoothing out silly charges that make no sense.
August 18th, 2009 at 7:24 am
I think you could have got the fee waived if you were persistent enough, but you got to pick your battles. I’ve had credit card companies tell me things were “impossible” that magically became possible when I asked to speak to someone higher up on the corporate foodchain.
August 18th, 2009 at 7:24 am
I agree that this is a lesson learned (Kevin @14 said it best). But why were you typing in numbers in the first place if you’re paying the bill in full? All the credit card sites I’ve seen have radio buttons that allow you to select the minimum payment, statement balance (which we pay), current balance, or some other amount which you then type in.
August 18th, 2009 at 7:25 am
JD,
I notice you didn’t point out to the customer service rep that the only reason you didn’t pay off the whole amount that month was due to a typo as you were paying your bill online. I’d suggest calling back, bringing this up, and asking for both finance charges to be waived and see what they say. If you’re a good customer, they’ll often be willing to waive the charges as a gesture of goodwill.
I’d suggest something along the lines of:
“Hi. On my billing cycle of XXX, I made a typo in one of the digits I was entering while paying my bill online that resulted in me making a payment of $100 less than the full amount. This resulted in two finance charges being assessed against my account, for a total of $24.64.
As soon as I saw the mistake on my next bill, I paid off the entire balance in full. I realize that the error was my own fault, but it was accidental as I always pay my bill in full each month. In light of this, and my previous history with your company, I was wondering if it might be possible for those charges to be waived?”
I’ve found that most credit card companies understand that sometimes people make honest mistakes, and they’ll make allowances in those cases for good customers. The key is to explain that it was a one-off accident and not just that you couldn’t come up with $100 more to pay in full that month, and are now trying to weasel out of finance charges.
August 18th, 2009 at 7:28 am
@Paul in cAshburn:
I think you answered your own question re: “what if an erroneous charge for $10,000 came in?”. Set up auto-pay to pay your balance *in full* (lest you get hit with finance charges), carefully review your statement before the auto-pay goes out, and cancel it if something is amiss.
If you pay your card in full every month, I don’t think a debit card would save you much over a credit card — essentially, they seem to be performing the same function for you. However, you might consider going to actual cash for non-necessary purchases, a la JD’s route. I’m considering that myself…
August 18th, 2009 at 7:28 am
I missed the due date for a $16 credit card bill by 2 days. (Forgot I had used the card at all that month.)
The fee? $15!!
August 18th, 2009 at 7:40 am
If you are still using Quicken, have you considered reconciling the credit card account to the statement each month? I do this every month and I always find charges and expenses I missed or didn’t account for. Once you get in the habit it doesn’t take that much time.
Perhaps that would be an interesting post in the future–the ROI of reconciling all of your accounts each month. Some people probably find it worth and others don’t.
August 18th, 2009 at 7:40 am
I don’t know if your credit card company’s website does this or not, but every one that I’ve ever been to gives you a radio button to “pay the current balance” or some such. It takes typos out of the equation. It doesn’t help your past situation, but will help you in the future!
August 18th, 2009 at 7:41 am
J.D.,
Sorry, but I totally disagree with you on this one. You should not take this lying down, nor should any of us. What the credit card companies are doing is wrong, and we all need to stand up to them in order for them to change. Even if this means avoiding credit cards all togehter until they change their ways. If I pay my balance off in full by the due date, I do not expect to be charged one cent more. Period. This two billing cycle thing is just another crooked scheme they have cooked up to shake more money out of us.
August 18th, 2009 at 7:45 am
It really annoys me that Capitol One makes it extremely difficult to set up automation. You have to request that they send you a form to fill out and then it takes time for processing.
Their online payment system is very different from other credit cards (we have 5 different credit cards and Capitol One has the worst system). It would be an easy fix for CapOne — every other credit card company has a easy to use system where you DON’T have to enter the amount you owe (You just say — “enter payment in full”). JD - I know you like CapOne for their overseas transactions, but because of their really terrible online payment set up I would encourage you to look at a different card.
August 18th, 2009 at 7:47 am
JD -
Why Capital One? I don’t want to start a debate over which card is better but I have heard nothing but bad things about them from consumer reports to the blogs.
If your committed to paying every month wouldn’t an American Express or another charge card work better?
I’m sure there are other companies with comparable cash back reward programs.
I have not personally used Capital One or Amex, so I’m not offering this as a personal reference but more as a question for my own knowledge as much as anything else.
Thanks,
Kita
August 18th, 2009 at 7:51 am
Does anyone agree that it’s getting to the point with credit cards that you never really know what you have or what they’ll charge until there’s a discrepancy?
You need a matrix to figure out how to make it all work in your favor, maybe because the whole system is set up in the bank’s favor–not many people like to think of it this way, but it’s true.
Unless you have plenty of time to read all the fine print (that they change periodically) and to fight off the hidden surprises, you’re better off going with cash, checks and debit cards. There’s less time wasted and emotion invested straightening things out.
I’ll gladly leave 1% cash back on the table to avoid the hassles!
Khurt (2)–I pay for airline tickets with my debit card all the time. Delta and Continental certainly accept them.
August 18th, 2009 at 7:57 am
Well that was a nice intro to two-cycle billing for me! I have never heard the term before… And I always carefully pay my card bills so I hope I never get hit with that!
I like my Chase Freedom card - 3% cash back on my top three spending categories, 1% elsewhere. I even got a $100 bonus for using the card for the first time! (I used it for a tank of gas, which was like $25 or so, and got the $100.) I use it to pay for all of my gas, pay my phone bill and then try to not use it for anything else. Since I don’t use it a lot, I pretty much garner the 3% from everything I do pay for. It’s not a whole lot, but in the past year I’ve “earned” another ~$70 that I wouldn’t have otherwise!
I don’t know if I could ever charge that much on my card, that’s for sure! My once in a while $200 balances give me grief, I can’t imagine adding another zero.
Don’t blame ya for getting off the phone quickly, I hate calling about that stuff too… (So I ended up with a $25 overdraft fee once, and just paid it. We all get hit with the stupid tax once in a while, and sometimes it just isn’t worth the fight.)
August 18th, 2009 at 7:57 am
I had a similar problem with discover. I either misread or typoed the payment and was .25 short. They charged me interest on the full balance!
I called them and luckily they credited the finance charge for me.
August 18th, 2009 at 7:57 am
Here in UK they don’t want to retain people who pay their bill off in full every month, as they can’t make any money if there’s nothing to charge interest on.
They’re really surprised about this - but the credit card company is in business to make money, not to help you, and by paying off entirely every month, how can they make money?
KC
August 18th, 2009 at 8:03 am
I have seen some comments stating that you are a “good customer” for them because you pay your balance in full every month. Really though, because of that, you are actually their “worst customer”.
I ran into a similar problem with Chase a few months back. Having always paid in full, I thought for sure they’d work with me and waive the fee, but I was flat out denied and no matter how many times I called and asked for supervisors they wouldn’t budge.
Later on, my GF did some research online and found a website (can’t remember the link) along the lines of “confessions of a Chase employee”. The gist was that they had 3 buckets for customers: always paid in full, sometimes paid in full, rarely paid in full. They’d do whatever they could to keep someone who almost never pays the full balance happy, but if you’re in the paid-in-full bucket they could care less if you threatened to cancel (and sometimes might even offer to do it right there on the phone for you).
We’ve since dropped our Chase card.
August 18th, 2009 at 8:04 am
I agree with my namesake above. I probably would have called and tried to get it removed myself, but they have no reason to do it, it was your screw up.
Anne (#17) and Courtney (#29) are right though, why not just click the “statement balance” button instead of typing in an amount?
August 18th, 2009 at 8:09 am
The other problem with the Capital One card is how it reports to credit. bureaus. My memory of the precise issue may be faulty, but essentially they do not report an upper limit for your card, so the card always to be at its limit as far as the bureaus are concerned. Not good for your credit score.
August 18th, 2009 at 8:11 am
Hey, this happened to me! I made a small keying in mistake and then got a finance charge. I paid that one off in full, and got another finance charge the next month anyways. Having never missed making a payment in full, I called American Express just to find out what was going on.
The woman I spoke to was GREAT. She explained that when the bills aren’t paid in full, the interest is charged from the begining of the billing period, but once you pay in full twice in a row, there will be no more finance charges. I was cool with that - it was my own mistake and I just wanted to know what was going on.
But this woman went beyond the call of duty and told me that since it was just an error and I was such a good customer, she would credit ALL the finance charges incurred from my mistake back onto my credit card. I didn’t even ASK for it - she just did it for me.
This is why I LOVE my American Express, and hate the other credit card companies. AMEX customer service is always incredible - the others are terrible. But I have to have them in my wallet because AMEX is not accepted everywhere.
August 18th, 2009 at 8:11 am
Thanks for all the feedback, folks.
I guess one of the reasons I’m so bashful about pressing on this is that I know it’s my error. Also, I know that I’m not actually what the credit card companies consider a good customer. Other than the fact that I charge a lot to the card (helping them generate revenue through fees), I don’t actually engage in profitable practices for them.
As for the “statement balance” button: I’m not sure why I don’t use that. It never occurred to me to do so. I think it’s because when I started, I would actually pay off the total outstanding balance, even if it was more than the statement balance. If I had charged $100 since the end of the statement, I would pay that extra $100. So I got in the habit of entering my payment amount by hand.
Eventually I realized that I was getting an “interest free loan” of the money over the statement balance, so I stopped paying that extra bit. But I didn’t stop entering the amount by hand.
I guarantee you I’ll click the “statement balance” radio button this month, though!
I’m undecided about calling back. If this were something where I thought I was being screwed, I’d actually fight fiercely for it, even though I’d be uncomfortable. But I just feel wrong asking for this since I know that it’s my mistake. That may be lame of me, but that’s how it is…
August 18th, 2009 at 8:17 am
I have made some mistakes with Cap1. I normally always pay the balance of in full every month.
Recently i made the payment on due date, but after 3pm EST. I am PST, got the late fee waived and interest removed.
If you don’t get what you ask for, ask for a supervisor. Then they will transfer you to someone in the US. Their first level is overseas/outsourced. Those people tend to go by the book and just state the terms. The second level support can refund finance charges, late fees, reset your billing cycle, etc…
Also, just because you aren’t paying interest DOESN’T mean these companies aren’t making money. They charge vendors percentages to take these cards.
So call back and try and get both charges refunded. The first one may be harder.
August 18th, 2009 at 8:26 am
I also recently got bitten by the snakes.
I made about a 1/3 payment of my July Amex bill just a few days after the end of the cycle. I was going to pay the balance as soon as we received my husband’s expense reimbursement at the beginning of August. But I didn’t get it posted by the due date! So Average Daily Balance (ADB) calculations kicked in, and instead of being charged one day of interest on the July balance, my August bill came with 30 days of interest on my ADB! Which was HUGE because of some equipment and lots of travel that my husband charged for work.
Like you, I have really learned my lesson. I will certainly be getting those payments in well before the due date from now on, even if we have to float money from savings before my husband gets reimbursed. And I took Debbie M’s advice and immediately went in to pay the balance down, and I’ll keep it low throughout this billing cycle because I know that September’s bill will have the two-cycle billing finance charges on them, too.
You know, these credit cards have been getting on my nerves lately. I don’t really feel like I have control with them. I need to start weening myself off of them.
August 18th, 2009 at 8:34 am
Like J.D. (and many of you it seems) I use an AMEX Credit Card for all of my purchases. I am excessively paranoid about being charged interest, so every time I get paid, I make a payment to the credit card for the expenses that I incurred during that pay period. Sometimes it is quite a lot, as I pay as many bills as I can (phone, gym membership, etc.) with the card. Making two payments a month makes my paranoia feel a little better, and lets me see in the middle of a month if I make a mistake like J.D. did. However for people with irregular income, or who only get paid once a month this wouldn’t be practical.
August 18th, 2009 at 8:37 am
Call them back. Ask to speak with a supervisor. Explain how and why the mistake happened. Agree to pay the first finance charge but not the second. This is a favor from them to you: acknowledge this to them. But tell them that you’ll cancel the card if they don’t give back the second finance charge.
August 18th, 2009 at 8:39 am
UGH. I had never heard of that one before, and I thought I was pretty familiar with the evilness of credit card companies.
Of course, I’m not surprised to hear it of Capital One. I used to have a Capital One card, and a mistake on their end resulted in a negative statement on my credit report that I had to fight with them to get removed. In the end I canceled the card and vowed never to go back. They make a business out of predatory practices and giving cards to risky customers. And their customer service is some of the worst! I would call and ask them to refund, and if they don’t, close it and go to someone who will treat you better.
BTW, as far as rewards cards go, I got a Charles Schwab Invest First Visa a few months ago. It gives 2% cash back on everything — which gets deposited directly into your Schwab investment account (which you have to open to go with the card), but nothing stops you from immediately transferring it out to a bank account. And Schwab has really blown me away with great features and an extraordinary level of service… so much so that I’m considering switching my primary bank to them (which is a big deal since I use ING and didn’t think anything could beat them).
August 18th, 2009 at 8:39 am
This is exactly why I get paper statements for most of my bills. I diligently reconcile the paper statement against my You Need a Budget register and make sure everything is listed correctly and in line. (I even save all of my receipts for a given month and check those against the bank’s record.) I know that it is not as good for the environment, and I have to spend 40-some cents on a stamp. But until I can trust these companies more, it is worth it to me.
I suppose I am the only one who spends more when I have cash? When I used the envelope system, I would either get tired of carrying all those separate envelopes around or I would get my cash mixed up in my wallet(is this $20 from my gas envelope or grocery envelope?). So, for me, it is better to use an electronic envelope system (You Need a Budget) and track my spending this way. If I have cash in my wallet, I tend to spend it. Now the only cash I use is from my “fun money” category, which I withdraw at the start of every month.
I do hate taking part in the credit card industry, and am hoping to be able to move to debit cards exclusively.
August 18th, 2009 at 8:42 am
Alexandra (55)–Like you I’ve had good experience with American Express. Since credit cards ARE their business, they seem to have real concern for keeping their customers happy.
The same can’t be said about most of the others. It seems as if we’re getting some new restriction or charge notification every month. I know legislative changes have been put through that they’re gearing up for, but from where I sit, none of it is in our favor.
August 18th, 2009 at 8:45 am
ethel: Nope, I’m at least one other person who spends more with cash than plastic. When I carry cash it just vanishes and I’m left with no clue what I spent it on. When I don’t have cash, I’m reluctant to use credit/debit for small purchases (say <$10) and when I do use it, I have a record of where that money went.
Some studies have shown that people tend to spend more with plastic, but obviously there are some of us that go the other way.
BTW, if you’re concerned about the environment, why not switch to digital statements and reconcile *those* with your receipts? You can download and save them to your computer every month so you still have a record. You can save the stamp and use your bank’s online bill pay, too — if you do it from the bank’s side, you don’t have to give out the account numbers to the company you’re paying. Personally I trust that more than mailing a check (on the rare occasions I actually have to put a check in the mail, I’m always worried it will get lost or stolen).
August 18th, 2009 at 8:47 am
JD,
I love you man, but…..that is LAME
You are a “good customer” because of all the charges you make on your card every month (they get revenue for those transactions). Although it is your fault - if they want to keep you making those revenue generating purchases with their card - they will remove the fee (in fact I can about guarantee you that a supervisor will remove it).
August 18th, 2009 at 8:50 am
fyi there is a 2% cash back card at Schwab. Rebates add up twice as fast
August 18th, 2009 at 8:52 am
J.D. - I agree - I wouldn’t push the issue either. You made a mistake. Lesson learned. It wasn’t your first money mistake, and probably won’t be your last.
Khurt - Try using the “credit” option on your debit card. That should work. It just takes a couple of days to be debited from your account, instead of instantly. Dave Ramsey says he sometimes needs to go that route with his debit card for some purchases.
August 18th, 2009 at 8:52 am
JD - good post, I had never heard of this two-cycle billing scam before. Nice to know. Yet another reason why we should all read the CC agreements and updates. I’m sure it’s buried deep down in the fine print somewhere.
I have made the same dumb mistake with my fat fingers in Quicken a couple of times over the years. I was always able to call and talk them into removing the charge (I pay in full as well). However, I bet with all the belt tightening they have really cracked down on those types of credits. I was just reading this interesting article over the weekend: http://finance.yahoo.com/news/Cardholders-Get-Rude-Surprise-wallstreet-1581515716.html?x=0&.v=5
One caution on the auto pay scenraio that many are advocating. I think you have to be REALLY, REALLY careful using this tactic. It is one more step back from your account. It would be easy to fall into the trap of not watching your account carefully because the bill gets auto paid.
Sure, you check your balance to be sure you have enough in your checking account to cover it but do you analyze every transaction. EVERY YEAR I have had unauthorized transactions on my credit card - EVERY YEAR!! I learned long ago to validate every charge. I’m disputing two bogus Walmart charges on an BofA card right now. I do travel more than most and have to use my cards a LOT so more use can lead to more chances for abuse. But too many employees know that merchants won’t bother trying to track down those charges let alone prosecute due to the cost involved. Be very careful, you have to look through every charge and I think you’re much more likely to slip into the trap of not doing that with auto pay (IMO).
I like using Quicken for this reason to log every transaction from the account downloads. I don’t auto accept in Quicken, I go through every transaction and accept it so i can carefully review and verify I actually made that transaction. This works better if you do it each week, even better if you keep every receipt to verify the purchase.
August 18th, 2009 at 8:54 am
JD,
You are being too soft on the credit card company. I follow the exact same principles you do and I also pay my bill in full every month. The few times that I have been late or assessed a finance charge I’ve had them waived. Just stay on the phone, be nice but firm, and be prepared to cancel your card if they won’t budge. It’s cheaper for them to refund your money than to acquire another reliable customer. Believe me, they ARE making money even when you pay your bill in full every month.
There is no shame in asking for YOUR money back even if you think it was your mistake. The two-cycle billing is a crummy business practice and is most certainly worth fighting.
August 18th, 2009 at 9:04 am
Maybe it’s because I’m an accountant, by day at least, but I’m a little confused by this post. In the end, your balance should have been off by not just by $12.12, but $112.12, right? You still owed the $100 you were short not just the finance charges you couldn’t find. So I’m not sure how you were able to balance out missing $100 unless you had a missing charge for that even amount and entered it twice?? I’ve noticed that when things don’t balance, it’s better to take the time to reconcile it properly. This would not have averted your finance charge issue, but certainly would have helped keep your records straight.
As far as the bank not working with you, there’s a simple solution. If this is a one-time error, and they can see from your history that it’s the case, there’s no reason they wouldn’t drop at least half of the charges to keep you as a customer (even if it is your oversight that caused the error). There are far too many other credit card companies out there that offer cash back to be limited to one with customer service that puts neither the customer, nor service, first. If they can’t look past one obvious error, what else are they going to be unwilling to help you with?
August 18th, 2009 at 9:16 am
I have just had this experience with Home Depot. Not like BoA or Citicard, HD website does not let me set up auto-payment monthly (isn’t it weird that HD cards are issued by Citi?) so I have to log in the HD site and type in the amount I want to pay. Please note that HD has promotion 6 months or 12 months no interest so Paying full balance means paying all, including the promotion balances.
It started that I was one day late, however I logged in and paid the actual balance including some of the promotion. The finance charge however didn’t count the amount that I had paid, it had been calculated on all, including any purchase that I made thereafter. When I called the HD customer service about the grace period, I was told that there’s no such thing call “grace period” and if I knew any credit card company that doesn’t charge interest on the purchase, I should tell the officer so she can get one. I had to pull out the fine print on each bill to show this person what/why/how she was wrong. Later I sent emails explain my frustration to the customer service.
I have decided that I will only use the HD card for promotion 6 or 12 months no interest, and will pay by my other cards for non-promotion purchase at HD. And of course, I start shopping at Lowes.
Don’t close your credit card account, it gonna hurts your credit scores.
August 18th, 2009 at 9:20 am
JD:
Here is what you do brother.
Call them back up, and TELL them what they are going to do. Don’t ask. Tell.
” I need you to remove these charges immediately, cash out my rewards, and close my account, immediately. You have 30 seconds.”
Then be quiet for 30 seconds. If it is not done, explain “I happen to write one of the most popular finance blogs in the country and I am sure my readers will be thrilled to hear of my experience with your company…all 1 million? of them.
Then you need to do a post about why credit cards SUCK. They SUCK.
There is no valid reason for using a credit card other than for the extension of credit.
The myths of the rewards, the float, the fraud protection, the safety, the accessibility, the rate arbitrage, the convienence, are all BS. I have heard every reason, and debunked every one of them.
There are those who proudly thump their chest with the “I have never paid a penny in interest” argument. They are somehow beating the system, even though the system makes the rules, and changes them at will buy not paying interest and using someone elses money.
Congratulations. Neither have I. But I also haven’t had to check and recheck my “statement”, pay a separate credit card bill, pay attention to rate changes, float periods, cycle type billing, due dates, amount due, congressional industry changes, limit reductions, etc.
I haven’t had to spend a single second thinking about how to reduce my CC risk and exposure.
When you factor in the accounting, transaction time, risk, and reconciliation, there is only one true reason for a credit card.
Credit.
Right there in the name. They are not called convienence cards, or fraud protection cards, or arbitrage cards or rewards cards.
They are called credit cards. For a reason.
Sure you can go through life without ever paying a finance charge, and think you have won the game.
Woo-Hoo. But you havn’t won. You simply haven’t lost…yet. And as this post prooves, everyone slips up eventually, and there they are with their “policies” to capitalize.
I have and never will understand why anyone who understands finance uses a credit card. They hurt more users than they help, they are full of traps, they take countless amounts of time checking, and double checking to make sure you aren’t getting screwed, they require a revist of past transaction to check again and the beneifts are way overrated by a small minority who actually recieve them.
But they do make some people “feel” better.
August 18th, 2009 at 9:28 am
Khurt mentioned this: “Last time I checked ( a month ago ) no airline or travel agent takes a debit card for payment”
However, I fail to see the difference. If they ask you for if it is a Visa/MC, you tell them either Visa/MC (whatever is on your Debit card), and then give them the number. The purpose of the debit card is that it’s guaranteed by Visa and as such has the option of being used either as a Debit card, or as a Credit card. If their system doesn’t allow you to choose “Credit” instead of “Debit”, then they need to fix their system that they use.
August 18th, 2009 at 9:32 am
J.D.
No sweat, I have another trick for you that I employed successfully with about 3 airline mileage cards last summer. Because you are financially savvy and have a travel bug (I’m the same), I took advantage of the airline credit cards. Open any airline credit card (I did it with AA, United, and Citi) and when you purchase X amount of goods and payoff the balance in a 3 month time frame you get a free ticket (not including applicable travel fees). I took 3 trips last summer and the most I paid for the roundtrip airline tickets was $75 after using the points they dropped into my account. You might try it.
*One Caveat: Airline credit cards will typically assess a fee for the program on the year anniversary of the card ($50 - $100) which if you cancel the card or in my case drop down to a no fee card you’re all good. 3 Round Trip tickets for a combined total of $125 after using the points/miles awarded by the credit cards.
**In addition, Discover typically has great deals on their credit cards as well. They will do a similar program whereby you get $100 cash back for opening an account, speaking X amount of money in 3 months, and paying off the card.
August 18th, 2009 at 9:34 am
Great advice on credit cards. Many people could avoid credit pitfalls if they followed these three rules.
August 18th, 2009 at 9:34 am
You’re still way ahead J.D. You have $489.32 in rewards saved up. Subtract the $24.64 and you’ve still got $464.68. Even with this mistake, so far you’re on top.
Still, for me, “You might decide credit card companies are evil and that you don’t want to carry credit cards at all,” is accurate. For me, they’re not worth the hassle, aggravation, and relentless attention to detail required.
I use my debit card (with mastercard logo, accepted everywhere that mastercard is, including for airline tickets) for nearly all my purchases. I haven’t saved up over $400 in rewards, but I also haven’t racked up over $20,000 in debt, which is what happened last time I had credit cards. I’m perfectly OK playing this topic on the safe side.
August 18th, 2009 at 9:39 am
Re Myself:
Most debit cards have a daily limit. I know mine is $500 so they don’t want to screw around with taking $500 every day for 10 days on a $5000 trip…not to mention the extra Visa fees.
August 18th, 2009 at 9:52 am
I made a typo like that on my mortgage years ago. Rather than applying all but the $100, the bank kindly “saved” my money until I corrected the error a month later and reported a delinquency on my credit report.
August 18th, 2009 at 9:53 am
I have to object to some of the suggestions that you should ask (aggressively if necessary) for a waiver of the interest charge.
Although demanding a waiver of fees or charges may get results, I do not think it’s being frugal/smart/savvy/etc to browbeat the credit card company into removing a legitimate charge. It’s chiseling. It’s taking advantage of someone else to pay for your mistake.
I like the idea of getting rich slowly, but I’d also like to think that we can all get there without having to wallow through the mud along the way.
August 18th, 2009 at 9:53 am
Re Ben:
Maybe you can ask to have that limit increased? I know I’ve purchased items up to at least about $2000 with mine with no trouble at all. I don’t make a lot of purchases larger than that.
August 18th, 2009 at 9:57 am
@62 and 64
You guys aren’t alone. Plastic is the only way I successfully budget. It wouldn’t really make a difference to me if it was credit or debit since psychologically I consider them both the same (just one gives me 1-3% cash back) and allows me to keep money in my savings account accruing interest for a longer period of time.
Give me cash and it’s a totally different story. I lose receipts, have no idea where the money went and it usually goes *fast*. I only carry cash when absolutely necessary.
Granted I have a pretty in depth excel spreadsheet that includes my monthly budget, yearly expenses, gift budget, ‘checking account register’, ‘checkbook (aka credit card spending), and my savings account money split into different goals.
Took awhile to develop but it works for me :).
Oh and JD, I think the most important comment was where is that rewards money! If there’s no incentive to have it still with Citi get it somewhere earning interest!
For me, with Chase, I wait until I get to 200 because they give me a bonus $50 and then it comes right out and straight to FNBO!
August 18th, 2009 at 10:16 am
I haven’t read all the comments yet, but a $24.64 finance charge on carrying just $100 worth of credit in a month? GAH! Why so HIGH? Am I misreading this? Does that really equate to something like a 25% interest rate? Or is my math all wrong?
(For comparison, my USAA Rewards card gets me 1 pt for every dollar spent that can be used for cash, travel or rewards, and has a 6% variable interest rate)
August 18th, 2009 at 10:26 am
I also learned this lesson the “hard” way and had a $45 finance charge.
Hopefully others will learn from your (and my) mistake.
-DC
August 18th, 2009 at 10:45 am
We’ve been using the same credit card (with airline miles as our reward) for several years now. We handle it the same way you do - paying it in full each month. We put everything possible on the card, so as to maximize the rewards we earn. We figure that if it’s something we’re going to buy anyway, we may as well use their money interest free and get a rebate on all our purchases.
We have run into a few problems, mainly because my husband insists on paying it at the very, very last minute possible so as to keep cash in other accounts where they earn some interest.
In the long run, the finance charges are still way less than the rewards we’ve gotten, which include a couple of trips to Mexico and one to Europe (for 2 people). They really are no-hassle too. When I bought tickets to Europe a year or so ago, I was able to find a really good deal on the internet myself. I was still short maybe $30 on the rewards I needed, but the person I spoke to on the phone explained that I could purchase the tickets with the card, which would give me the additional rewards I needed, and then apply the rewards to that ticket purchase. That’s a pretty good deal, I think!
August 18th, 2009 at 10:51 am
Sorry if I’m repeating someone - I didn’t read through all the comments.
There are two other simple solutions to this problem that will certainly prevent a repeat.
(1) Pay nearly the entire balance (rather than the bill) when you make a payment. That’s what we do. Say the bill was $902, but by the time we are making the payment (about a week before the due date), the balance is $1651. We would pay a nice round number like $1500, rather than $902. This has the added benefit of getting a smaller value reported the the credit bureaus (I checked first what date my CCC reported).
(2) Pay the entire balance weekly. That’s what my son does, because he has more trouble keeping up with due dates. That’s also a good solution for anyone who is tempted to overspend with a credit card, since you know when buying something that you will be paying for it in less than a week.
I actually don’t recommend the auto payment option for credit cards. Here is why …
Auto payments (whether from checking or onto a credit card) are almost always made ON the due date. And, I find, about once a year or so we get a glitch where the payment fails to go through. Although a hassle for electric, or cable, or other payments, it’s usually just a small “return payment fee” or “late fee” that I have always been able to get waived. But with a credit card, you risk fees AND interest, and, subsequently, a harder time getting it all waived.
August 18th, 2009 at 11:08 am
Not sure why you didn’t press on to get the credit back. In fact I would press on, ask for a manager, press on, and ask for a manager.
Any company that doesn’t think your continued business (and all the money you earn them by swiping your card) is worth keeping… doesn’t deserve to keep you. Switch credit card companies. (This is why I love AMEX.)
August 18th, 2009 at 11:09 am
You definitely shouldn’t worry about this. Two cycle billing is one of the things that is being outlawed by the new Credit Card Accountability Responsibility and Disclosure Act that was signed into law this past May. In fact, this particular item is one of the things that goes into effect this coming Thursday!
Here’s some more info: http://www.npr.org/blogs/thetwo-way/2009/05/credit_card_legislation_become.html
August 18th, 2009 at 11:26 am
@Troy (#72) - so you don’t reconcile your bank statement I take it? What’s the difference between doing that or reconciling a credit card statement?
I’ll happily keep using my credit card like I have for years, earning hundreds of dollars in rewards in the process.
Another point - my brother-in-law lost his wallet last week, along with the $300, that was in it. Too bad there’s no 800 number he can call to get that replaced.
August 18th, 2009 at 11:29 am
Even if you think it was your fault, double cycle billing is totally unethical (and that is why Congress took up the topic). Perhaps you owe half of the interest, but you definitely don’t deserve to be on the line for the whole thing.
Credit card fees are pure opportunism. Pay them if you want, but all business is a negotiation between the customer and the supplier. If you give them the right incentive, they will come around. If you don’t want to negotiate, then I guess you deserve what you get (but I’ll never ask you to go car shopping with me).
Go online and pay the balance to $0. Then call and tell them you’d like to get the finance charges resolved before you begin using the card for purchases. They have an interest in the future fees they can garner from retailers when you use the card that they won’t collect until you start using it again. If they don’t want the business, they won’t budge. You can put the card in a drawer and refuse to do business with them. You might in fact be able to call them in 2 or 3 months and try again…
Your threat isn’t to cancel the card; you threaten to put it in a drawer. That leaves them with no income (in fact some cost for record-keeping) and the liability of an open account. Your future business is almost certainly worth $25 to them, they’d pay that much in advertising to get you as a new customer.
If you can’t get the whole thing, stick to your guns. You consider it fair that you have some finance charge, but double cycle billing (while currently legal) is definitely unfair and you should say so.
August 18th, 2009 at 11:42 am
Troy @ $72 - There are multitudes of reasons to use CC’s that give significant advantages. In most scenarios it is almost impossible to travel without a CC. You cannot rent a car unless you tie up very large amounts of money on a debit card. Have fun carry all the cash on a trip. If you use travelers checks good luck actually using them because so many business in foreign countries won’t take them anymore. And if they actually get stolen I hope you tracked every single one or your a outta luck! Etc., etc., etc.
However, the best reason is by leveraging my buying I have made tens of thousands of dollars in interest by using THEIR money to purchase things. MY money stayed in interest and investment income bearing accounts. Due to my business and personal travel I can easily spend $100k on CCs in a year. At 10% interest that’s $10,000 I made in one year. Don’t believe I can make 10% - my portfolio is up 40% this year alone. That doesn’t even begin to take into account all the free airline tickets and rewards I’ve gotten over the years.
So you keep paying cash and losing potential interest/investing income dollars and rewards and I’ll keep wisely managing my money and making lots and lots of more cash to get rich slowly!
August 18th, 2009 at 11:53 am
@LB #41:
“I think you answered your own question re: “what if an erroneous charge for $10,000 came in?”. Set up auto-pay to pay your balance *in full* (lest you get hit with finance charges), carefully review your statement before the auto-pay goes out, and cancel it if something is amiss.”
Understood, thanks. I was trying to communicate an example where I was unable to review the statement before the auto-pay goes out (on the beach in Bali), in which case the minimum payment would be made, and I could challenge the charge when I got home - but auto-pay wouldn’t attempt to draw $10,000 out of my checking account for paying in full.
August 18th, 2009 at 11:55 am
Aw, what a pain! What I have learned from this is that two-cycle billing is a mean trick! I think I might have originally learned this from Suze Orman, but it’s definitely something I screen offers for, even when I’m looking at potentially switching cards to get a better interest rate or something.
August 18th, 2009 at 12:29 pm
Its things like this that made me decide to ditch credit cards for good. I am in the middle of the Dave Ramsey Total Money Makeover and once I get done paying everything off. They are all getting closed. Ive already chopped the cards so all I need to do is finish paying. If a company wont take a debit card or cash, Im no longer doing business with them
August 18th, 2009 at 12:30 pm
This is exactly why I try never to use credit cards, even “cash back” cards. Those $25 in fees - totally your fault, but also a totally human mistake to make - account for $2500 in spending (assuming 1% cash back). To me, the hassle is not worth the return. The $400 you have for your vacation required $40,000 to be spent on the card. Forty THOUSAND dollars! I’d rather just use my debit card…. I bet I spend at least 1% less just from knowing it’s coming out of a limited fund of money.
August 18th, 2009 at 1:01 pm
A. Capital One is for suckers
B. Check the box that says “Pay my balance in full”
August 18th, 2009 at 1:02 pm
I think you gave up too easily on getting the charge removed. I’m sure if you looked at some of the techniques on other PF sites you’d come up with a script which would help.
August 18th, 2009 at 1:16 pm
Capital One is scum. I cringe whenever I hear about intelligent people using them.
I am quite impressed that Ken managed to get them to waive something. Generally I think it’s against their religion.
Back before the term “predatory lending” had been coined, that’s exactly what they did to my bf. He had terrible credit problems, had just gotten his first real job after years of spotty temp employment, and they offered him a card with a $250 limit. They didn’t say anything about the $225 worth of fees they were putting on it straight away. When he got pounded with overlimit fees he tried to fight it; all they did was quote policy and point out it was in the fine print. Hours on the phone. He refused to cave so the balance kept going up and up, until some time later he lost that job and on top of other problems filed for bankruptcy. Years later they tried to resurrect the zombie debt but somehow he finally managed to get them to go away. (I think they had been sued in the interim over their practices, and lost.)
So yes, it was his fault, he could have avoided or abbreviated the whole mess, but they basically took advantage of his situation and used it against him for profit. Scum. They are the worst of every bad thing credit cards are.
More recently he had a problem with Chase. During the switch from Wamu they changed his online access without telling him and he couldn’t get online to pay his bill on time. He could not get the fees waived in spite of 3+ phone conversations. He cancelled the card, and then went to their website and found a list of contact info for their stockholders and higher-ups. He sent an email explaining the situation to one or more of them. The next week they called twice and emailed him asking how they could fix the situation. He refused to re-open the account but they apologized, waived the fees, and reduced the interest rate on his remaining balance.
Interesting what happens when you talk to someone at the top.
August 18th, 2009 at 1:21 pm
E,
That was actually the second time in a year that i did that too. The other time i totally just paid late and had fee refunded.
I do have stellar credit, 800ish and a $12.5k limit with them.
But i also did just have my account compromised with them as well after this happened. Someone called in and convinced them they were me and got them to change info. No charges though, but had to put fraud alert on my credit.
Oh and i am pretty smooth on the phone too
Edited to add: Once i found my mistakes, i paid the card off, and even some extra to cover any outstanding charges.
August 18th, 2009 at 1:26 pm
Sorry about your mistake. You should dump capital one. They suck, most of them do! Try to get a card with your credit union. If they are a good CU then you need not worry. Most CU cards can have a reward structure. Both of the CU’s I belong to have various cash back option type cards available.
August 18th, 2009 at 1:55 pm
Ok, somebody has to stand up for the Credit Card industry.
Scum, evil, predatory…. Are we talking about a business that lets you use THEIR money and allows to pay it all off in full without paying a cent in interest, and then gives you rewards on top, and if you need to carry a balance, they are there to help?
Credit card is a financial tool and should be taken very seriously.
It comes with a list of instructions and terms of agreement. So, the lesson here is – read the instructions and all contracts that you sign!
Second lesson - human errors are very costly, $26 is actually pretty cheap. You should seriously consider autopay.
JD, I applaud that you take responsibility for your error; I think it is important for someone who preaches Financial Responsibility.