Reader Story: How I almost got screwed by the CARD Act
Published on - October 28th, 2012 (by Ellen Cannon) This post from Danielle Rodabaugh is part of the reader stories series. Danielle is the chief editor of the Surety Bond Insider, an online publication published by SuretyBonds.com, which tracks developments within the surety industry. A graduate of the University of Missouri School of Journalism, Danielle has a special interest in developing finance policies, entrepreneurship and online marketing. Want submit your own reader story? Here’s how.
That day started out as a typical day at the office. Actually, it was even better than usual. I’d been working on a number of projects for my surety bond insurance company that finally started to come together, and I found out that my boyfriend got a promotion at his company. Not to mention the fact that I was still riding the high from having purchased a new (used) car just two days before.
Then I got my monthly credit card statement email from Barclays. I was initially excited because I’ve been working to fully pay it off, and I love seeing the lowered balance every month. To my dismay, however, the balance listed in the email was $1,135, which was significantly higher than the $888 I had in my records. I proceeded to the activity report page to find a $247 interest charge.
“What the What?!” I thought to myself, Liz Lemon-style.
I realize that some people might not consider $247 to be a lot of money, but I’m a frugal 24-year-old working professional looking to save money whenever and wherever possible. After racking my brain and checking my other credit card balances, I determined it must have been some sort of mistake. I needed to get this issue resolved ASAP.
I called Barclays customer service where I spoke with a woman who attempted to explain the situation. I opened the card in August 2011 when purchasing a $1,290 iMac so I could pay it off over a 12-month period without paying any interest. After I received the card in the mail, I occasionally used it for other purchases (namely gas, gifts, a nice dinner when my parents were in town, etc.).
According to the customer service rep, I had failed to pay off my computer within 12 months, so I was being charged the full year’s worth of interest. I immediately knew that was absolutely preposterous because I had made sure I paid off the balance well before the deadline. So, I told the woman I’d be calling back with a detailed report of my monthly payments.
After reviewing my financial statements, I verified that I had paid $1,995 on my card since August 2011, which is obviously significantly more than the $1,290 I had charged for the computer.
Fine print of the CARD Act
Fortunately, my second customer service representative was much more informed about the situation. She gave me the legal reason why the interest fee was charged. Under the federal Credit Card Accountability, Responsibility and Disclosure Act of 2009 (or Credit CARD Act of 2009), credit card companies must apply payments to whichever part of the balance has the highest interest rate. Since my computer was essentially “financed” at a 0 percent rate for 12 months, any payment I made was first applied to the other charges that were subject to higher interest rates. The remainder was put toward the purchase of my computer. So, of my current $888 balance, $544 of it was still from my initial computer purchase.
I understood what she was saying, but I was vehemently opposed to what it meant for me: a $247 interest fee.
She offered to waive the fee if I paid the entire remaining balance of the computer purchase immediately. Fortunately I had just been paid a few days before, so I had plenty of money available in my checking account. But what if I didn’t have $544 to immediately give Barclays?
Now, let me clarify that I understand the purpose of the law is to keep credit card companies from taking advantage of consumers. I also understand that, as a credit card holder, I’m solely responsible for understanding the terms of my credit card agreement. All too often I read consumer complaint-themed editorials only to judge individuals for their lack of personal accountability. However, I believe this situation is trickier than it needs to be.
There are only two ways I could have avoided this situation.
- I could have paid off the balance of the computer in full before using my card for any other purpose.
- I could have paid off my entire balance, including other purchases, before the August deadline.
Had I known how payments were applied to the account, I obviously would have chosen one of these options. I also think it’s worth mentioning that Barclays issued the card to me with a $1,300 limit. In just one year the company increased my limit three times, and it’s currently at $3,500. I can only assume this is a direct result of how frequently I use the card combined with the fact that I always pay my bill on time and in an amount greater than the minimum requirement.
In the end, I understand that I obviously was not as informed as I should have been. Barclays was fully within its legal right to charge me the $247 interest fee. However, I can’t help but think this situation is a byproduct of a regulatory change intended to limit predatory credit card companies looking to take advantage of consumers, not give it loopholes. At the same time, I must also “credit” Barclays for explaining the situation clearly and finding a viable solution both parties were satisfied with. My only remaining concern is that other individuals in this situation might not have been able to front that payment and thus would have been stuck with the fee.
Do you consider this to be more of a legal loophole or a lack of understanding on my part? Either way, I hope others can learn from my experience. I’m interested in what others think about the situation, so let me know in the comments.
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Lack of understanding. When using credit card offers you need to be sure you understand them.
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Yes, and kudos to you for keeping your cool, making the phone call, and resolving it in your favor! Too many folks just roll over.
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If the clarification helps, I did understand the terms of the card, which were primarily that I had to pay off the balance of the computer within one year to avoid paying interest. What I was not aware of were the terms of the CARD Act, which required that the company apply the >$1900 in payments I made to interest bearing purchases before they apply them to the initial purchase I had made. I submitted this article to GRS to bring this to the attention of others so they don’t experience a similar problem!
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Keep in mind that before the CARD act the banks could apply your payments to whichever purchases that they wanted to. Given my own experiences with these kinds of offers from many years back, I feel pretty confident saying that the bank would have done exactly the same thing even without the CARD act. They would still have told you that they had applied your payments to the portions of your balance that you were paying interest on, they just wouldn’t have been able to say “We’re so sorry, but the government is making us do it.” Perhaps some banks would have been more willing to negotiate an agreement to avoid the charges because it would have made them look more predatory without the law to back them up, but that was never my experience.
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Prior to the CARD Act, card issuers generally applied your payment to the balance with the lowest interest rate, so you’d be paying longer on that high interest rate balance. The Federal Reserve has an excellent guide to the changes under the CARD Act here. http://www.federalreserve.gov/consumerinfo/wyntk_creditcardrules.htm
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This is a nasty loophole designed specifically to entrap you and I appreciate you bringing it to this audience. That is a whopping fee to pay. Was there a separate line for the no interest versus the interest part of the account in your monthly statement? Just curious. And you had always had a balance on the interest bearing side?Do you have the orginal agreement and does it spell out for you the interest fee?
I think blaming the CARD act is convenient way for the bank to avoid the obvious: that they are counting on people not to pay attention to the details to make money and preying on their ignorance. They knew exactly how to spin this to consumersr, when without the CARD act they would have found some other interest or fee for not having the card paid off in x months. They are after all in the business of making money off this deal.
That said, I will bring this to the attention of the financial consumer protection bureau. It’s no guarantee that the loop hole will get changed, but it will bring awareness to a bigger audience much like this article. And read the financial agreements, because I can’t afford $250 in unnecessary interest either.
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I had another “entrapment” experience. I got a no interest Home Depot card when buying a grill. The statements came in month after month and then stopped two months before the promotional period was to end. Of course, they started up again once the interest kicked in and a late payment fee was applied. Now I know to set up payment reminders in my financial software, of course.
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To answer your question, when I received my statements, I simply went and made my payment, which ranged from $100 to $300 depending on my financial situation as I knew I’d have no trouble paying off the computer in a few months. I knew it wasn’t collecting any interest, so I didn’t pay much attention to how the structure of the statement was broken down. This would be a good thing to go back and look at. And I wouldn’t really call it a “fee” as it was actually just the interest that would have accumulated without the special offer. Also, I like your perspective on how it’s less about the CARD Act and more about how financial institutions can manipulate it to help themselves. Obviously as the card holder I should be aware of how the card works as well as the laws that surround its use, but as an intelligent consumer, I think it’s a bit ridiculous to expect people to know them unless they’re informed about it, which is why I submitted this article to GRS!
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It’s nice that you are informing people about this specific situation, but what you should be telling people is that if someone is offering you something for free, there is always a reason. In the case of 0% interest for some time period, the trick is pretty much always that you get screwed if you don’t pay the entire balance by the end of the time period.
Yours wasn’t that bad, for non-credit card based 0% financing they like to charge you the interest on the full balance over the entire time period. For example, you buy a $1,000 couch at 0% for two years and you pay most of it off but you have $5 left at the end of two years. You will be charged $400 (assuming a rate of 20% which is about what they will charge) for having $5 left on the balance.
My advice would be to never buy something with 0% financing, they are sneaky and if you slip up it costs you way more that can save you. Also, why the heck are you buying $2,000 computers if you are always carrying a balance?
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This is nothing more than the law of unintended consequences in action. Any time you make sweeping changes to a complex system you can expect the changes to result in negative impacts you might not have specifically expected.
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I think this is the law of intended consequences at work. Barclays set this up to entrap people. They used the offer of deferred the interest on the computer to entice people to use their credit card.
Since the card started with a large balance, they knew that people would not pay it off every month. That meant they could apply any payments to other charges and eventually collect the interest unless the entire bill was paid off before 12 months.
This is not a consequence of the CARD act, intentional or otherwise. Its using the CARD act to justify consumer fraud.
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Do you use the word “fraud” to simply mean situations that you don’t like? Because this is certainly not fraudulent. They loaned you money according to specific terms that you have a contractual obligation to repay.
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I apply the term fraud to knowingly misleading someone for your own financial gain. That’s what Barclays did here.
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No, they did not. Barclays is living by the law as set up by the government. They are doing nothing illegal or unethical. It may not sit well with you but if it were truly fraud, people could bring legal action against the company. The moral here is read before you sign. If you do not understand FULLY the legality of a situation and choose to go forward anyway, shame on you for your ignorance. Thus the saying “A fool and his money are soon parted”.
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Hang on there John, it could be considered fraud. And may not have followed the letter of the law. The CARD act states you have to put the money towards the highest interest rate. A deferred balance is not 0% as advertised. It was accruing interest the entire time. There’s a definite gray area here.
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Except the practice of applying payment to the highest interest charges has been in effect long 2009. I knew this in the 1990s when I too was a twenty-something using credit cards to pay for things I couldn’t afford.
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According to the OP, the practice is now mandatory. Was it before?
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The practice the CARD Act replaced was that the bank could apply payments to whatever portion of the balance they wanted. Usually that meant they applied it to the lowest interest rate. But in the author’s case, they certainly would have done exactly what they did, with or without the CARD act.
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That is a short and sweet way to explain the exact problem here, so thanks for that! I totally agree with you. The purpose behind the CARD Act is great, and I’m sure it’s affected people positively more than it has negatively. However, there are always ways to take advantage of the system. I just hope others can learn from my mistakes here!
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I’m of two minds about this one. On the one hand, I think any time a person uses credit the credit provider has a lot more control than they do. As consumers, we have to know the terms — or preferably avoid credit altogether. (I’m sure I’m not the only GRS wondering why the OP didn’t pay cash for the computer?)
On the other hand, I know how easy it is to make a mistake. I tended to ignore my credit card terms because I pay off the balance immediately if possible One month, I accidentally was off by about $7 and incurred a $15 interest fee! It’s not a lot of money, but it was still one of those head-smacking “d’oh!” moments.
Ultimately, not every financial decision we make is going to be perfect. We learn by making mistakes too
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Does the credit card provider not allow pre-authorized payment? I have eight (nine?) credit cards all with pre-authorized payment and I never worry about late or insufficient payments even when I’m traveling.
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Can you contest any charges that you’ve automatically paid? My unease about automatic payments is that I will forget to check the statement and not notice an unauthorized charge. But if you can still contest the charge after you’ve paid the bill and get the charge reversed, that’s another story.
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Yes, you can contest unauthorized charges and get them reversed when on pre-authorized payment.
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Good question! I’ve never looked in to it. (Just did some googling — both cards I have use this feature.) I usually pay off my balance almost immediately — you can tell I don’t charge much — so I never really bothered to look into the feature.
The error was totally my responsibility — and a good learning experience!
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I totally agree. In a perfect world, we would all fully understand every aspect of how credit card companies work and the rules that govern them. (Heck, in a REALLY perfect world, I’d never need to use a credit card.) However, we’re human, so we only have so much time and so many resources at our disposal. We’re all going to make financial mistakes, like it or not. Hopefully none of them are too horrendous. In the mean time, I hope others can learn from my experience!
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On one hand, whenever you use a financial product–credit card, debit card, mortgage, car loan, etc–it’s your responsibility to understand how it works. After all, it’s your money, and the financial industry is trying to take more of it. So it’s an adversarial relationship.
On the other hand, it’s not really a fair fight, because the financial industry has the knowledge and resources that most consumers don’t. So you have to be very, very careful when you use one of their products.
One way to avoid the situation you were in is to have at least two cards: one that you use to pay off one (and only one) item over time, and one that you use for convenience and pay off every month. Never mix the two.
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That’s a great strategy I’ve actually recently started to use myself. It really does work, and it makes it much easier for you to manage finances.
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“Do you consider this to be more of a legal loophole or a lack of understanding on my part?”
I think it was intentional by Barclays. They made the zero interest offer with an understanding that some/many people would not pay it off in 12 months under the CARD act. You can call that a “loophole” if you want. If it was a small business I think it would be called consumer fraud.
I also think you could file a complaint against Barclays based on the CARD act. You DID pay interest on the computer. Barclays was simply deferring it for 12 months. So they misapplied your payments in order to avoid fulfilling their agreement to forgive that interest if you paid the computer off in 12 months.
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I think Ross makes an excellent point. It wasn’t zero percent because the interest was accruing the entire time.
Of course if it had really been a 0% balance, they applied the payments exactly as you would have wanted them too. And if you had paid the balance in full (including the extra charges you had made) then you’d have been delighted about the ability to have the use of the card and no interest.
In the latter case, you’d have been annoyed if your payments each month paid against the 0% balance and you still had monthly service charges….
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Let’s be clear. Barclays established the terms of this offer to defraud people. It knew full well that at least some of its customers would not fully understand the implications of those terms. In fact, it was depending on it.
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Yeah, they willfully committed fraud, an illegal act, and then at the last minute let the OP off with a very reasonable counter offer. That makes a ton of sense. If it were fraud, the government would be all over them with numerous charges. If they were the hucksters you claim, they would never have let the OP out of the deal. Come on people, just because a company uses the law to it’s advantage does not mean they are diabolical monsters. Don’t use credit if you’re to lazy or ignorant to know what you’re getting into. Period.
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This doesn’t seem like something intended to protect consumers at all, but to let credit card companies profit by hitting people with fees they don’t expect.
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I really do think the CARD Act has terms that genuinely do benefit the consumer. However, in this situation, I believe it does give companies the ability make certain offers that could end up costing the consumer rather than helping them. I just hope others can learn from my unfortunate situation.
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I think this is a great reader story. I have never held a balance on any of my credit cards before, but I was considering opening one of these cards when I buy an iPad, because you can earn interest on your money all year and then pay it back right before 12 months is up.
This loophole perfectly demonstrates why I hate the card act. It was meant to protect irresponsible consumers who overdraft their accounts or charge up debts they can’t afford. Banks still need to make a profit somehow, so now they are much more insidious with their policies and it ends up being worse for consumers.
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“It was meant to protect irresponsible consumers who overdraft their accounts or charge up debts they can’t afford.”
No it wasn’t. That is pure propaganda with no truth to it.
The CARD act has nothing to do with overdrafts or whether people could afford payments. It was intended to require credit card companies to apply payments people make to the person’s greatest benefit. It does nothing to protect them from overdrafts or non-payment.
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Hear, hear! I always find it amazing that someone, somewhere, finds a way to blame positive consumer legislation for causing the lowdown dirty tricks the credit/banking industry comes up with to try to bilk the consumer.
I have benefited much from the Card Act. We should ALL be informed about just what it changed. The 2 things I noticed on my Barclays card is that they no longer can charge interest for 2 months on 1 month’s balance. No more double-cycle billing. And they can’t automatically overdraft without my permission. Statements are a lot clearer, too. I think that act saved a lot of consumers money, which means the card industry is very unhappy. They’re contributing heavily to this election for that reason.
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Thanks for your great comment! I fully agree with you. From all the research I’ve done (mostly following this incident) I think the CARD Act was a great piece of consumer protection legislation. I think the problem I had here was an unintended consequence of how the rules technically work, however. Because I’m an intelligent person who had no previous knowledge of this, I wanted to share my problem and the lessons I learned with the GRS readership to help others avoid a similar situation.
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I think you needed to understand your card holder agreement better. If you are going to carry a balance on your card, you need to understand each and every piece of how interest is being charged. Especially if you are going to have some of what is charged at 0% interest and some of what you charge at a higher interest rate.
The problem is not that Barclays was charging you interest, the problem was you keeping a balance on that card. The CARD act says that credit card companies can no longer use payments to pay off 0% interest charges while allowing higher interest charges to build up on the remaining balance. If they had done as you wanted them to – your balance would have been higher than $888 all year long, as they paid down your 0% debt and allowed the rest of the debt to accumulate interest.
If you are going to take advantage of 0% offers, you really need to have a second credit card to carry your revolving balance. Or, you could pay off your balance in full and stop carrying a balance going forward. That might necessitate a big overhaul on your current lifestyle, but it would probably be worth it.
I think Barclays was incredibly responsive with giving you an option that allowed you to not have to pay the interest charges you incurred. But I don’t think you should be blaming anyone other than yourself for the mess up.
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“The CARD act says that credit card companies can no longer use payments to pay off 0% interest charges while allowing higher interest charges to build up on the remaining balance.”
The fact that they deferred billing the interest charges for 12 months doesn’t mean they didn’t charge interest. In the end, they did charge interest on the computer for the full period. If that interest rate was higher than the other charges on the bill, it would be clear Barclay’s had violated the CARD act.
Whether what they did was legal or not, it was clearly not simply a consequence of the CARD act. It was manipulation of interest charges and payments for the benefit of the bank. Exactly what the CARD act was intended to prevent.
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The lesson is that there is no system that cannot be gamed, and that the more complex the system the easier it is to hide your gaming.
In other words, as we say in the submarine force, no new lessons were learned.
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Ross
I think the OP would admit freely that she understood interest would be charged if she didn’t pay off the computer by the end of the promotional period. She isn’t disputing that. What she did not seem to understand is that when she choose to charge more than just the computer on that card – only the computer was at the promotional rate and her new charges (with interest accumulating immediately) would be paid before the 0% debt was paid.
ALL of her other charges were being charged interest from the moment she charged them (since she was in fact carrying a balance by not paying off the entire amount every month). The OP thought her payments were going towards the item with a 0% interest rate, but because she charged more on that card than just the computer – her payments were actually going towards her new charges (which were being charged interest from the get go).
The CARD act prevents credit card companies from allowing interest to build up on account totals by applying payments towards charges with the highest interest first. If she hadn’t carried a balance of charges *in addition* to the computer, she wouldn’t have gotten “caught” on this provision. It was the OPs choice to charge more than just the computer to her credit card. It was her choice to buy things she couldn’t pay off in full each month. It was therefor her responsibility to understand how payments would be applied to a balance which had differing interest rates being charged.
As I said before, if Barclays had applied the payments to her account as she wanted them to – she would have had a higher balance than $888 at the time she got the statement in question. Because instead of paying down the charges with had interest being applied immediately, she would have been paying down the 0% debt. Even if they had done as she wanted, her credit card balance would have been higher because interest would have been accumulating all her other purchases ($705 + $888). She had purchased more stuff attached to a high interest rate than she had purchased with the promo rate. Her interest rate is 18% on the card. If they had paid off her 0% rate first, she would have been accumulating 18% interest on the additional $1593 she charged on that account.
This problem is because she charged more than she could pay off in full, not because of the CARD act.
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“ALL of her other charges were being charged interest from the moment she charged them”
So was the interest on her computer. It just didn’t show up on her statements.
Perhaps she should have known better. But Bernie Maddoff’s victims should have known better too. Its true of almost every fraud victim in retrospect.
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Madoff is a criminal and in jail for his criminal acts. Barclays is still in business with no charges pending to my knowledge. See a slight difference? The OP foolishly chose to go into a deal without fully understanding the consequences or parameters. Her fault and hers alone.
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I fully agree that I could have better understood the terms of the card as well as the CARD Act. The fact of the matter is, however, that I didn’t. And of course, carrying any balance on any credit card is “bad.” However, I did. I submitted this story hoping to draw attention to this issue because I assume if it’s a problem I – as a typical consumer and card holder – had, it’s a problem others could face as well. I got the issue resolved and learned from my mistakes. By sharing my problem with the GRS crowd, I guess I’m making some people assume that I’m incompetent when it comes to managing finances, but like I said, I think I’m a good example of a typical consumer, so I hope that others can learn from my experience.
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By applying the payments to the interest bearing portion of your statement first, the CARD Act saved you much of the $250 charge you received at the end of 12 months by lowering the amount owed that was currently accuring interest. It’s not a loophole intended to hurt the consumers – the law is just specifically designed to take benefits as soon as they are available. Most of the time, this is beneficial to the consumer. It’s impossible for the law to know if you will pay off the balance in full at the end of 12 months, so its impossible for the law to know which way would be better for you. And in your case, it would have only been slightly better had the payments been applied to the iMAC first.
I think it speaks to the quality of the company that they gave you the option to avoid the charge by paying it off a few days late.
I wouldn’t want that portion of the law changed, though I might make a case for better disclosure on your statement. Perhaps a line that lists amount owed by current interest rate would be sufficient?
I would recommend not using these type of credit cards for other purchases until the balance is $0 for a month. Most of the time, they won’t have the best rewards programs anyway, so it would be in your interest to use another credit card.
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Those are all great points. I got the card because I graduated from college in May 2011, and I needed my own computer ASAP so I could do freelance photography and design work outside of my “regular” full-time job for an online insurance company. I knew based on my new income I’d have no problem paying off the computer since I was offered 0% interest for 12 months. Ideally I wouldn’t have needed the card in the first place, or I wouldn’t have used it for other purchases. But I did, and I learned a lesson. This is less about blaming somebody and more about drawing attention to a problem that does indeed exist – a problem that I hope other consumers can avoid.
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As others have noted: You should never charge things onto a card with a promotional balance/rate.
Prior to the CARD Act, this was an ironfast rule. If you charged anything on such a card, the bank would charge you standard (high) interest on it for the entire time, while applying your payments to the promotional balance. It was this very abuse that the CARD act ended!
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“Perhaps a line that lists amount owed by current interest rate would be sufficient?”
The author’s previous credit card statements likely included an “Interest Charge Calculation” section. My statements typically have this all the way at the bottom, after the list of charges & credits. There should be a line item for each interest rate, including the 0.0% introductory rate.
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From one frugal 20-something professional to another, not carrying a balance on your credit card is a great way to save money!
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That’s my method. I pay off my card in full each month, and interest rates never matter to me.
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I agree. To me Ellen seemed rather cavalier about having a balance on her card when it seems she had the ability to pay it off in full. Best not to put yourself at the mercy of the credit card companies!
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I agree with that wholeheartedly
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I think the problem is that the CARD act tried to close some popular loopholes, which only incited the credit card companies to create new ones.
But I think you’re at fault for this one. I know in my credit card statements it states pretty clearly that payments are credited towards highest interest rates. In fact, I just checked and it ALSO states “Because we apply payments in excess of the minimum payment first to higher rate balances, you may not be able to avoid interest charges on new purchases if you have another balance at a higher interest rate unless you pay your balance in full each month.” I don’t have Barclays, but I would not be surprised if your statement has a similar clause.
I read the fine print to my statement when I had a promotional period ending to be sure that I wouldn’t be hit with a big interest charge, and I don’t think it’s fair to blame the credit card company because you didn’t do the same.
I am glad for you, though, that you came to an agreeable solution with Barclays; I think they offered you a fair option, and maybe this will be a mistake you learn from and change your approach to paying your credit card.
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I just want to clarify that I’m not “blaming” Barclay for this situation. I realize that this problem occurred 1) because of how I used my card and 2) because of how the CARD Act changed how payments must be applied. I was very grateful that Barclay agreed to take off the fee if I paid the remaining computer balance off in full. I just wanted to draw attention to the fact that this problem can arise, and that consumers should be aware of it. Thanks for sharing your perspective!
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Interesting story but I don’t like the title of the piece because it blames the only non-guilty party for the problem.
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Confidential to El Nerdo: There was a post yesterday (on Saturday!) and I’d love to get your feedback on it.
Sincerely,
Another El Nerdo Fan
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Hi Joanna– I saw! I’ve read it already a couple of times. Had a day mostly AFK though, so I haven’t had a chance to comment, but I will– too late, unfortunately, to engage in actual discussion, but better late than never, right?
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It is never too late to engage in actual discussion.
(At least not while the post is still on the front page.)
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Couldn’t Barclays have done the exact same thing before the CARD act if it wanted to? In fact, I vaguely recall that being in the fine print many years ago the one time we had to float a 0% CC loan. (Though I could be misremembering.)
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Yes. The CARD act is just a convenient excuse that makes it sound like they had no choice.
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That is the only way the CARD Act comes into play in this story. The bank attempted to use it as an excuse to dissuade a consumer from fighting the charge. They could have attempted to blame any number of other factors, such as “market rate,” “my supervisor,” etc. As Nicoleandmaggie said, they would have done exactly the same thing pre-CARD.
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Agreed. And they would’ve used a convenient reason to reluctantly, finally, waive the charge, while blaming you for not knowing what was in the fine print of the agreement. One thing they would never do is to apologize for burying it in legaleze where they hoped you’d never find it.
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Kudos to you for calling up and negotiating a solution! Overall, though – lack of understanding on your part. For me the take-home message is: I can avoid all of these intricacies by paying off in full each month.
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I opened up a Sears card to get 12 months no interest (if fully paid off in the 12 months) on a purchase of a lawn tractor. The salesman warned me at the time to pay off the purchase before charging anything else on the card. I made sure that I did, I paid off the tractor well before the time elapsed.
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It’s awesome that he specifically told you that ahead of time! That’s what I think should happen in these situations, but I know that’s probably asking a lot. Hopefully by addressing the problem here, others will learn from my mistakes.
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This system was set up for the greater good, there is always going to be one off situations. Banks are there to make money, not make sure that a 0% bill was intended to have paid off faster than the higher rate purchases. This is where like you did, the customer service reps have to use there best judgement. This is a great example of why credit cards are evil;)
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The title was a little misleading. I don’t think it was the Card Act that caused the problem. I don’t blame you, either. It’s just an important lesson that credit card companies will deal with regulations and restrictions in a way that ultimately benefits them, no matter what. I would take it a step further and say they probably offered the 0% rate initially and added increases regularly not just because you were a good credit risk, but also because it would tempt you to “muddy the waters” by adding additional debt and never reaching a zero balance.
Important lesson learned. We should see credit card companies as adversaries, and read all info about terms and changes carefully. They are hoping you won’t.
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I don’t know how you can blame Barclays in this scenario.
(1) They followed the rules in the CARD Act, which actually benefited the writer because otherwise, she would’ve accumulated interest on her subsequent purchases.
(2) They offered her an option to waive the interest she legitimately incurred.
The blame, if you want to go there, lies entirely with the writer for her lack of understanding.
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“They followed the rules in the CARD Act, which actually benefited the writer because otherwise, she would’ve accumulated interest on her subsequent purchases.”
Instead she accumulated interest on her computer purchase. How did that actually benefit her?
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But that wasn’t because of Barclays choices, that was the OP choices. No one made her continue to charge on the card. She knew the only charges to have no interest were the computer charges.
It seems like you are saying Barclays shouldn’t have charged any interest. On any of the OPs charges. But that isn’t how credit cards work. And the OP should have understood how her payments would be applied if she wanted to use the card for both a promo charge as well as revolving everyday charges.
This story could just as easily have been written from the opposite direction…the OP got a promo of 0% interest on her computer and also had $1500 of additional charges on the same card. At the end of the year – she was shocked that after having paid her $107.50 (more than the minimim required!!) every month on the bill – her credit card balance was over $1775! How could that have happened? Well, it would have happened because while she paid enough every month to pay off the computer at 0% interest, she wasn’t paying anything on her debt that was accumulating interest daily. In this scenario – she could have been complaining that the credit card company choose to apply her payments to the balance that wasn’t increasing – instead of the balance that was. Oh, what bad credit card companies! (sarcasm)
When you carry revolving debt – you will accumulate interest. If you don’t want to pay interest, pay off your debt in full every month. Period.
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It definitely had the potential to benefit her if she had paid her card off in the 12th month (i.e. finished paying her computer and cleared her balance of other charges as well). Because she avoided the month-to-month interest on her other purchases.
They can’t really at the end of 12 months go back and retroactively decide what part of the balance to apply a payment to. In month 1 they have to decide to pay against the computer and charge interest on the other purchases, or pay against the other purchases and apply the remainder to the computer.
The same is true in month 2 and 3 and 4 …. At the end of month 12 the “extra” had obviously knocked down the balance of her computer, but not to zero, and then she got zapped. However, she benefited every month to that point. If she had worked her balance down and paid it on month 12 she’d have benefited outright.
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She only accumulated interest on the computer purchase after the 12-month period, which was eventually waived.
Her lack of understanding benefited her.
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Ross Williams:
I just looked over all your replies. You obviously hate the banks and they can do nothing right in your eyes. I’ll refrain from replying to you in future because I can’t debate with an unreasonable person.
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Ross, you have replied to what seems like a majority of the comments here. Unfortunately you seem to miss that in the end Danielle did not pay a penny of interest on her computer. Yes, they put $247 as a line item for that interest, but when she spoke with the second rep, they agreed to waive it in its entirety if she would pay off the balance in full, which she did. Basically, she ended up paying no interest on her computer and either no or less interest on her other charges than she would have incurred if Barclays had applied her payments to the computer first. In the end, her misunderstanding of the way payments would be applied led to her paying less than Barclays was fully authorized to charge under their agreement with her. I think the final resolution was a fair way to handle the misunderstanding, and I enjoyed reading this story.
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“that wasn’t because of Barclays choices, ”
Of course it was. Who do you think set up the terms of this agreement? They understood full well that some people were going to be caught in the trap they set.
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Ann -
I may hate banks or anyone else that deliberately engages in fraud, while blaming their victims for their failure to detect it until it is too late. I don’t think every bank or credit card company does that.
LeRainDrop -
Yes, Barclays made her whole after two phone calls. Clearly they trained their customer service staff on how to handle these situations. I am sure they make a lot of money on people who only call once or not at all.
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I don’t understand your need to blame the OP and excuse the card company, but let’s go with that.
She was charged much more interest on her oldest purchase, in the end, even though she believed she had paid that debt off. After she began charging other purchases, the credit card company started applying payments to her new purchases, and letting the interest build up on the older one.
The OP is not complaining about paying interest on her newer purchases. She understands she owes that.
The interest Barclays tried to charge is far, far, FAR more money than the interest she would have owed on her new purchases. It had a long time to build up. There’s no comparison. How you think Barclays did her some kind of favor is a mystery to me.
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Peach
I am not blaming the OP for charging stuff -that was her choice. But if they had applied the money the way she thought they were – her balance wouldn’t have been $888 at the time when she got socked with the $237 interest charge on the computer. Because the bank was paying off her newer purchases – she wasn’t being charged the 18% on those that she would have been if they had applied the money to her 0% charges.
She charged over $1500 in addition to her $1300 computer. If all her monthly payments went towards the computer for the first 12 months – she would have been carrying the $1500 debt at 18% the entire time while she paid off the $1200 debt at 0% interest.
As I have said from the get go – the problem was that the OP was carrying a revolving balance on the same credit card that she put a promotional charge onto. She was going to have to pay 18% on part of it unless she paid it all off before the promotional time period ended.
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Peach
Based upon the interest she was being charged for not paying the computer off, it does in fact look like Danielle’s interest rate on the card is 18% – which is a pretty typical interest amount. I don’t know if Danielle wants to confirm that or not, but it is just simple math to figure it out based on the numbers she gave us.
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Off the top of my head, I think the interest rate is 18%. Thanks for figuring that math out as that’s a good point. I keep trying to point out that I’m not trying to play the blame game here. I’m not blaming Barclay nor the CARD Act solely as I think it does way more good than harm. This is why I ended the article asking what other GRS readers think about the situation. I wrote this article in the hopes that others might learn from my lack of understanding about the CARD Act and how it applies payments, especially when it comes to low promotional interest rates.
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I always assume special introductory rates are designed to lure me into some sort of trap just like this. Trust no one and keep the balance at zero always.
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I fully agree. Should I have known better? Absolutely. Does that make it any less of a problem that could adversely affect the finances of many, many consumers? No. By sharing my lack of understanding, I hope others can avoid a similar problem.
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For the most part, I avoid credit cards (carrying balances, anyway) because there is really no way to win. So one some level this post is a yawn. Surprise surprise, the credit card companies found another way to charge exorbinant amounts of interest! What else is new?
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This isn’t a result of the 2009 card law, or any other. It’s the card company applying payments in a way that benefits them, pure and simple. It’s just like the old Bank of America policy of changing the order of transaction processing from chronological to size-descending, so they could increase the overdraft fees they collected from unsuspecting (usually lower-income) debit card users. They’ve since changed that practice, thanks to a lawsuit and $600 million settlement…
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This situation was absolutely due to your lack of understanding. But many people who have not experienced this would suffer the same problem, so this is a great story to educate the readers!
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Thanks for your input! That’s what I was hoping for. Sharing your mistakes with a ton of people online requires you to swallow your pride a bit, ha! However, I hope others can learn from my experience here and avoid a similar problem in the future!
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I agree this situation was totally due to the lack of understanding of the author. Anytime you take advantage of a “deal” offered by a credit card company, make sure you read ALL the fine print to confirm what your payments are credited to first. Unless the card had a zero balance before you used it to take advantage of the deal and you don’t charge anything else to the card, you’re going to pay interest. Lesson learned (but I only had to learn it once years ago!)
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Agreed…after this experience, I’ll definitely be much more careful in the future. I just hope by sharing my experience others can avoid a similar situation.
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I have taken advantage of the 0% interest rate on Lowe’s purchases when they were large purchases, and, although I had the $, I’d rather keep it in my interest-bearing checking account and dole it out monthly. I also continued to use the Lowe’s card to make smaller purchases (they offer 5% off if you use the card) that I paid off each month. In the online account information, Lowe’s had a box you could check to apportion the payments so I said pay off the other charges and put the rest toward the 0%. While it’s probably easier to have two cards as others have mentioned, the fact that I get 5% off (plus any other discounts on the item I’m buying) if I use the card makes it worthwhile to me to spend the extra time figuring out how to balance the 0% for 18 months and the smaller purchase payments.
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On a similar note (borrower beware)… according to Dave Ramsey, 88% of interest free loans, or 90-days-same-as-cash type contracts, do not get paid in full before the deadline. At that point those contracts convert to payments that are usually at a 24% annual percentage rate. Most people who think they’re going to get an interest-free loan, end up paying dearly for it.
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It’s great that you could get it fixed and had the money to pay it. Ties right into my mantra of “it never hurts to ask”.
Since all you had to do was ask (although you kind of had to ask them twice), it makes me wonder how many people would pay the fee and never ask (or never ask the second time for an explanation).
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Yes, I think this is one of the most important takeaway points, too. Although the first customer rep I spoke two wasn’t very helpful (and by “not helpful” I mean “equally unaware of the implications related to the CARD Act”), the second one definitely helped me understand the exact situation and what I might do to resolve it. Furthermore, the card was issued with a $1300 limit, and now my limit is $3500 (and I never asked for an increase). So it’s safe to say they’ve appreciated how I’ve managed my account over time.
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While I understand what happened here, it could have been easily avoided by not spending money you didn’t have. Don’t buy a new computer if you don’t have the cash to pay it off…no?
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Yes, I understand the concept that credit cards are *always* bad and carrying a balance is *always* irresponsible. But when you’re dealing with real financial decisions in real life sometimes people need to take advantage of credit. Here’s the basis for my decision: I graduated from college in May 2011 and started a full time job. Since I no longer had access to the free computer labs and software on a campus, I needed the computer to continue doing freelance design and photography work from home. Based on my earnings at my “regular” job, I knew I could pay off the computer within a few months. From what I can tell, my biggest mistake was using the card to make other purchases.
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Based on my observation, I’d say this is typical symptom of too much regulation again.
My opinion is that, sure, had the OP understood the rules, they wouldn’t have gotten “almost screwed.” However, the “rules” in this case are so counter intuitive, it’s likely they’ll “nab” quite a few. I’m sure they know this! The Government issues regulations, they’ve got to counterbalance them with a few loopholes to get back to even… maybe I’m a bit cynical!
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“I’d say this is typical symptom of too much regulation again”
No matter how often this is repeated, it still isn’t true. “Regulation” had nothing to do with this. It was a choice Barclays made. As the Lowe’s example posted in an earlier comment makes clear, they could have chosen otherwise.
In fact, its not clear that Barclays is even in compliance with CARD. As I said above, I think you could make the argument that, once they charged interest on the computer, they had a responsibility to reallocate previous payments.
Deferring interest payments shouldn’t allow them to circumvent CARD. That may be why a couple calls gets you your money back. The last thing they want is a legal fight that tests the legality of this.
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This was my thought. Yes, I could have better understood everything if I had done better research. Perhaps this is “buyer beware” and I should have known better, but I didn’t. By sharing my story, I hope others can avoid a similar problem in the future!
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I figured out a sure-fire way to avoid these “loop holes”, “fraud”, “malfeasance” or whatever else you want to call it: pay cash. This tried-and-true method has been working flawlessly for me for years. I also found a ground-breaking new way to cut my gasoline expenditures in half: I drive half as much. Try it. It might work for you, too.
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This is not the CARD act screwing you, or big business screwing you either. By paying the current interest bearing portion of your balances first, you didn’t get charged interest. By crediting that balance first, you probably saved nearly the $250 interest charged at the end of the 12 month period in fees that would have been due immediately and compounding. I think the fact that Barclay’s allowed you to pay off the balance late and remove the interest shows that they are a relatively good company.
A poster above said 88% of these 0% interest for x-months deals don’t get paid off in time. That would actually make the CARD Acts provisions (applying payments towards current interest bearing portions first) better for the typical consumer.
The take-away from this article for me, besides always understand the contracts you sign, is keep things as simple as possible to protect yourself when you don’t understand. So if you take a 0% short term loan by signing up for a credit card, don’t use that credit card for anything else until it is paid off. This “keep things simple” approach can save you money in other areas, like being weary of whole-life insurance policies that combine insurance and investments.
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I fully agree with your takeaway. That’s exactly what I hope others takeaway from reading about this, too!
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I say Both.
While it’s our responsibility to protect ourselves and understand the nasty fine print, I also think that just because it’s a law doesn’t mean it’s a just law. People abuse laws and so do companies, and I think in your situation the word “predatory” definitely applies.
A person with scruples would call you up and say, “hey, just want to be sure you know…”
A company? Not happening.
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Lack of understanding on your part. They followed the law. You didn’t bother to find out how your payments would be applied and so YOU didn’t fulfill the terms of the agreement. There’s no loophole here that they took advantage of. They didn’t change the rules on you. You simply made an agreement without understanding what it was, and when you didn’t fulfill it, they let you off the hook. You’re pretty darn lucky if you ask me.
Lesson learned and passed on to others: Read the terms of credit card offers including those for balance transfers, 0% purchase offers, etc. so you understand how to fulfill the terms of the agreement.
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Many of these no interest for 12 months deals are designed to catch you somehow. Barclays most likely intentionally used the law in a way to catch you. If the law wasn’t there they would have had some other quirk inthe agreement. I avoid these deals for this reason.
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To some degree you are correct. 12 month same as cash offers are made by companies that realize most people do not have the self control, understanding or discipline to follow through on the deal and then they get a big bonus at the end of the term. The credit industry is in business to make money, not make zero interest loans. People (like me) that pay off their credit balances completely every month are the ones gaming the system. I get all the perks of using a credit card (cash back bonuses, frequent flier miles, special offers)and none of the detriment. How is this possible? All those people that keep racking up interest charges that keep the credit industry raking in the big bucks. I say a sincere thank you to you all.
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I’ve got several thoughts.
1.) Most people, including educated ones, would have interpreted the situation as you did.
2.) I’d love to see your piece be required or recommended reading for everyone receiving any credit card. It makes perfect, practical sense and gives actionable information — which is not true of the pages of fine print that corporations generate.
3.) I’m more convinced than ever that I do not want any new credit cards, especially if they offer me zero interest for the first year. I want more joy with less stuff (which is the sub-title of my blog).
Great post, Danielle. You’ve done thousands of people a real service.
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Thank you so much for your response. I feel like I’m a pretty good example of the typical consumer who wants to save money and take advantage of deals. I’m definitely not a financial mogul as are many of the readers here. Most of the time I live frugally, but I do use credit cards from time to time. When I do use them, I fully intended to “follow the rules.” I’ve never been late for a payment, and I almost always pay more than the minimum due. My proof of this is that my card limits have been increased substantially in the past few years without me ever having to ask. However, the “rules” in this situation seem a bit tricky and sneaky to me when all is said and done. I also tend to trust others more than I should, so it seems I need to learn to be more suspicious of others’ motivations before getting too much more involved in finance.
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That’s why all “frugal” people should have an emergency fund, if not larger savings down the line, and avoid borrowing. It would have been best to save up for the computer rather than borrowing to buy it. The potential profits of gaming the zero interest purchases are much smaller than the potential loses of doing it wrong.
The only option where I think credit can be justified besides things like home purchases is in case of a productive asset expected to bring you profit in order to offset the risk of borrowing (in other words, a business purchase). But even then, a business needs a cash cushion in order to survive.
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I also have a savings account with a sizeable cushion. (It’s hard to determine how much information to include in an article like this.) My point was that others in this situation might not have had the funds available to make the payment right away. I’ve since decided to pay off my credit card balances by accessing some of my savings.
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aaaaaaah! from the article i understood that you relied purely on your checking. emergency funds FTW! because stuff happens– all the time.
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I have benefited from this clause in the CARD act and have successfully gotten interest charges and late fees removed as a result, so I’ll have to say it was the OP’s fault in not understanding the way credit cards and deferred balances work. Also, assuming that the CARD act had never happened, the OP would have still been charged interest on the remaining unpaid balance of $544. I think the bigger lesson here is charging more to your credit card than you could handle with your existing cash flows.
I never charge my credit card for more than the cash I already have in my bank account. Same with deferred interest or 0% balance transfers – I look at them as a way to shift my cash flows to a different part of the year, but the cash to pay the loan off will sit untouched in my savings account for that entire time.
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Had I known how payments were applied to the account, I obviously would have chosen one of these options. -That is why it pays to be wise enough to scan a few things and ask a lot of things.
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Credit Cards are awesome! I should get one.
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Interesting story, and definitely true about the accountability thing. Too many people try to pawn off their bad money choices to other areas like the credit card company, etc. Just another reason why you should be knowledgeable about all areas of your credit card agreement and statements, as well as Federal laws.
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We don’t use credit cards in our day to day lives, but we often use the Home Depot credit card for our real estate business. We take advantage of the 0% offers when appropriate and then pay it off well in advance of the due date. In order to avoid interest, I have to make sure that I pay for any non 0% charges on a monthly basis and I have to make sure to pay the minimum charge well in advance.
Even with all that checking and monitoring, HD for some unknown reason has repeatedly charged us a $2 fee. I can’t figure out what the fee is for, how I’m incurring the fee and if I call they take the fee off. The problem is that the card is in Mr. Sam’s name so I can’t call without him being available to talk to the rep and he could care less about $2. To me its not the money, its the fact that they are just charging us $2 fee for no reason or for no reason that anyone can explain. Last time around I just paid it off but that undermines the whole point to taking advantage of the 0%. Mr. Sam just ran up the card again and I’m dreading the repeated run around.
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I’ve fallen for that too (in ~2003) for a 0% balance transfer, but stupidly used the card for other things, and was not given such a nice option from the card rep. I paid everything right then and there..including the interest…
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there’s also a third option to avoid this: don’t use credit and pay cash. Which also happens to be my favorite option
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“I was not aware of were the terms of the CARD Act, which required that the company apply the $1900 in payments I made to interest bearing purchases before they apply them to the initial purchase I had made. ”
That was not required by the CARD Act as the Lowe’s example above makes clear. It was a choice made by the credit card company to its own benefit.
If someone deliberately short changes you, you can blame yourself for not counting your change. Or you can blame them for trying to take advantage of you.
“I always assume special introductory rates are designed to lure me into some sort of trap just like this.”
Which is part of the problem here. Because, as the Lowe’s example demonstrates, there are reasons for zero interest loans that benefit both the lender and the borrower. Lowe’s isn’t trying to trick you, its giving you an incentive and ability to buy from them. Barclays is acting as a predator taking advantage of people’s weaknesses.
“It would have been best to save up for the computer rather than borrowing to buy it.”
This is Get Rich Slowly’s favorite kool-aid. The rational basis for the decision on whether to use credit or save is whether the benefits from immediate use of the item are justified by the extra cost of using credit.
If you need a computer, renting one would almost certainly cost more than any interest you paid. And if you don’t need a computer, then you shouldn’t use your savings to buy one either.
Get Rich Slowly does a good job of educating people about the dangers of credit and credit cards. But sometimes it has the tone of alcoholics warning people against the evils of drinking.
Credit, properly used in moderation, can make your life better. But, as here, there are a lot of predators out there and you need to be careful not to be one of their victims.
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Some people pay off the full balance on their credit card. Most people do not. Which means most people who take this “deal” and use the credit card in the typical fashion will end up not getting the “deal’.
Barclays promised zero interest if you paid off the computer within a year. But, that highly misleading. You not only had to pay off the computer, you had to pay off the balance on any other charges as well.
I suspect had they made it clear you had to bring your credit card balance to zero within a year, there would not have been any misunderstanding. Their description was designed to conceal the real terms of the agreement.
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I have been there and done that with interest payments. While I understand where the OP is coming from, I also understand where Barclays is coming from. It is more beneficial to have your money going toward something being charged interest in order to pay the card off quicker.
Yes, you should have paid closer attention to how your payments were being applied, but banks can do a better job with indicating this in large or bold on the statement instead of in their usual small letters.
This is just another lesson learned that I am sure the OP won’t make again. Luckily, she was able to pay off the charge, so Barclays would take the interest charge off.
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This is exactly how I feel now that the situation has been resolved!
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I don’t pay any interest on my credit card if I pay off the balance each month. But if I carry a balance I pay interest from the moment a charge is posted. If those are Barclay’s terms, then they would have charged at least one month’s worth of interest on any new charges even if they were paid in full. In other words, that 0% interest computer loan would still have cost the card holder money.
Watch out for predators.
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I blame the writer. I feel bad for her, but I still blame her. From what I understand she used the card to charge a promotional item, but also used the same card to charge monthly purchases that she did not intend to pay off at the end of the month, so therefore she was expecting to pay interest anyway. You stated the exact amount you paid back, but you left out the amount you charged, which is equally important.
You also have an option #3: Pay off all extra purchases of the month before the next cycle is due.
I have been funding my house rennovations for the last 3 years almost entirely on Home Depot interest free/ promotionals. I NEVER charged more on that card than I could pay IN FULL each month PLUS cover the minimum of the promotional not to get charged interest. At the same time I also saved since I knew the minimum was not going to be enough to pay it off in the allotted time.
Maybe I’m missing something, but that’s common practice I thought.
I know my current promotional requires at least a $25 minimum. If I also buy something that’s $100 during the cycle, I’m going to pay a total of $125 that month to insure I don’t get charged interest for either the purchased items or the promotional item. It’s basic CYA practice. Also, they are required to list how much you have left to pay on your promotional items on each statement so if you can see that number is not going down, you may want to look into that.
Ok, here goes the judging (and this coming from someone who is certainly not fiscally perfect). Why are you buying an overpriced brand laptop if you are also charging things that you fully expect to pay interest on because you’re not paying them back in full? I didn’t even know about the CARD act, but knew that the ONLY way to avoid interest is to cover the total expenses of items subjected to interest and the minumum of the promotional item. Also, they are required, if you have multiple promotionals, so apply your payments to the one with the closest due date.
I don’t mean to be harsh, you’re cleary involved with your finances and made a mistake, but you certainly got screwed, but I don’t think it was by the bank or CARD act. IMO CC should not be used for small item purchases except as part of a budgeting tool, with the intent to pay in full each cycle. Perhaps less i-computers and fancy dinners until they can be paid for upfront.
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I don’t blame the CARD act here for “screwing” you. Sorry I just can’t agree with that conclusion.
Hopefully the bank wasn’t trying to blame the government for this either as I’m sure the bank knew exactly what they were doing and new exactly how the law works and intentionally set up their card to lead their customers into such a situation. Cause thats what banks did before CARD and will do after CARD. Banks are absolute trying to get customers to pile up more charges and more interest. The 0% deal alone is a good example. They aren’t offering 0% deals out of the kindness of their hearts. They do it cause they know the vast majority of people won’t pay off that charge and will owe the full interest.
This should have all been disclosed in the terms of the card and documented at the time. The bank knew exactly how it worked and would have written that all in the terms you signed to. The monthly statements should be showing the ongoing balance for the iMac very clearly.
The author piled up about $1593 in other changes on this card and if she’d paid 18% interest on that it could have been up to $286 in interest. Hard to know without more etail on the purchase history but if it was even then extra cost would have been ~$160.
CARD didn’t screw you. You didn’t read and understand fully the terms of the credit card.
You’re lucky you weren’t actually screwed and the bank was nice and didn’t apply the full charges.
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I’m just sort of still confused by a “frugal 24-year-old” who has a Barclays credit card. Maybe that’s a common bank where you are but I think of it as a high-end elite bank.
Also, a “frugal” anyone who buys a $1200 laptop. You can get a good and capable laptop for less than $500, and that was also true a year ago. $1200 is not terribly frugal, IMO.
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RE: the computer and being frugal, part of being frugal is not going for the cheapest option but balancing cost and quality. In my experience of buying laptops, I’ve bought 4 over a wide range of prices. My two PCs, which were lower cost, lasted two years each. My two macs have lasted many more. My mom is still using my 6.5 year old macbook, and I have a 1.5 year old one that is just fine, and I anticipate having it many more years. I’d rather pay $1200 for something I’ll use for a longer period of time.
But, as always, one should balance their own needs. There’s nothing wrong with making a different choice than me. But I wouldn’t necessarily call someone who buys a $1200 computer non-frugal.
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“I’m just sort of still confused by a “frugal 24-year-old” who has a Barclays credit card. Maybe that’s a common bank where you are but I think of it as a high-end elite bank.”
I’m 29 and make a pretty modest income. I have a Barnes and Noble credit card through Barclays. It’s a free card that gives me a 5% credit on all B&N store purchases. I figured there was nothing to lose as long as I only used it for the store and paid it off in full each month. I didn’t realize Barclays was known for targeting high-end consumers.
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An iMac is not a laptop; it’s large-screen desktop computer that I purchased to use for freelance design and photography work, so it was a necessary investment once I graduated from college and no longer had access to campus computers for free. Why people are questioning the reasoning behind my computer purchase is beyond me. I got the Barclay card when I purchased the computer because they partner with Apple for large client purchases, and I was trying to build my credit responsibly.
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I don’t think you’re irresponsible per se, but there seems to be a lot of justification around here. I didn’t want to question your computer purchase (b/c I think people should be able to buy what they can afford to buy), however I felt I had to bring it up in one of my comments because you also mentioned that you also charged basic, mundane things (and charged it with the intent of accumulating interest on it). This is what alarmed me. It’s one thing to use a 0% interest card to obtain a free float, and yet another to use it to revolve items which will accumulate interest. If I was in a position where I would need to pay interest on a dinner, I would NOT be purchasing a $1300 computer…jessayin. I understand the need to startup and the excitement of getting on your career path, but just be wary of some bad habits that may form is all we’re saying. To go from a free campus computer to a (IMO overpriced) computer seems like overkill, when you are in a position where you charge items like gas and gifts without the intent of paying them off before interest accrues.
I can’t believe an i-Mac is required to do freelance design and photography, especially at entry-level.
Unless I’m missing something, I don’t think your extra charges are 0% as well, so I don’t see how option number 2 that you provided would help you avoid paying interest. If you waited up to a year to finish paying for revolving items, you’d still have to pay interest for each month you did not pay them in full. The fact that you included this as a solution tells me that you still may not fully understand revolving debt.
I really didn’t want to respond again because I don’t want to seem like I’m piling up on you, I really do think you’re on a good path and it’s good you’re thinking about these things (not that that matters coming form some internet stranger), but there’s still some more learnin to do, especially if you’re endeavoring to do free-lance work which requires above and beyond budgeting because of the inconsistency of pay.
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I think this is whining. No one has to take out a credit card. Do you think the bank is lending you money (in reality what a credit card is) out of the goodness of their heart? Don’t charge=no fee’s. Simple no?
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In a perfect world, nobody would every need to use a credit card. But people do need to use them, and when they do, problems can arise, whether they’re the fault of the cardholder or otherwise. I was simply trying to share my experience so that others might learn from it.
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