I don't often post follow-ups to previous articles, especially after just a few days. But following Tuesday's post on two-cycle billing, a couple of things happened that deserve mention.
Understanding Grace Periods
Several readers suggested that what I experienced was not two-cycle billing but the lack of a grace period. Special thanks especially to Kitty, who linked to the American Express document on understanding grace periods. Kitty wrote:
If you didn't pay your previous month's bill in full, grace period no longer applies, and you are charged interest ON ALL NEW PURCHASES until you pay another bill in full. After you do it, your grace period starts to apply again, but you still have interest that accrued on all new purchases you made in the meantime.
So, when I accidentally paid my credit card bill $100 short, the grace period for the next billing cycle went away. In order for me to regain my grace period, I'd need to pay the bill in full two months in a row. This isn't two-cycle billing, despite what the Capital One customer service rep told me.
A Call from Capital One
Meanwhile, Kathy from Capital One customer service left a comment:
Please note that Capital One does not use two cycle billing; we never have. Two cycle billing is when a company computes finance charges on the average daily balance of the last 60 days rather than just the last 30 days. What that means is that they will go back two billing periods before the cardholder sent in their payment, and average the daily balance of all 60 days.
Capital One does not use two cycle billing. If your closing was today for example, we would stop, go back 30 days, and take the average daily balance of those last 30 days, assess finance charges and then send out your statement. This is one-cycle billing.
Kathy was able to track down my account information, including my phone number, so she gave me a call. We had a pleasant chat.
She confirmed that what GRS readers had suggested — that the issue was with the lack of grace period — was, in fact, correct. Kathy explained that with two-cycle billing, the credit card company computes the “average daily balance” (which is what they charge interest on) not just on the current month, but on the previous month, as well. That's not what happened in my case.
In my case, when I mistakenly paid my bill $100 short, my account began to accumulate finance charges. During the second month, I paid my bill in full. But because I was carrying a balance, the grace period for that month didn't apply, which means I still accrued finance charges. Again, the only way to get rid of finance charges is to pay my bill in full two months in a row.
I think I understand things now.
During our conversation, Kathy offered to refund the finance charges I had accrued — not just the second month's finance charge, but the first month's charge, as well. I felt almost guilty accepting this offer, but I did so.
Now, I realize I'm in a sort of special position. I have a public blog that gets enough attention for Capital One to notice and respond to my complaint. Most people don't have that sort of leverage.
Still, I'm grateful for the way Capital One handled this, especially considering the entire thing stemmed from a stupid mistake on my part. I'm not about to become a spokesman for Capital One, but I'm satisfied with the way things worked out.