How I almost got screwed by the CARD Act
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.
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.