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Credit Card Charged Interest...Valid?
snorepez
Registered User regular
Registered User regular
Credit Card charged me a random "Finance Charge" and I'm afraid to call for clarification. Details below.
Timeline:
Sometime in 2004, my first year at uni.
Sometime in 2004, I setup my first (student) bank account - overdraft and credit card.
First time I use the credit card is May 2008 (according to my online statements).
May 08-Jan 09, I use the credit card instead of my check card everyday, and pay off the balance at the end of each month (to build some decent credit).
For the past few months, I haven't been able to completely pay off the balance, but always paid significantly more than the "minimum payment." So after Jan 09 there has been a moderate remaining balance each month.
Up until yesterday, my credit card has never been charged a cent of interest.
So yesterday, I'm charged $11.80 for a "finance charge." I figure that's about .85% interest on what my balance was.
The website (wells fargo) is stating (generically, for all credit cards) that there is 9 months no interest. But May 2008 - April 2009 is more than 10 months...why are they just now charging me interest?
I don't want to call the bank for clarification because I've been told that "Student Bank Accounts" retain the 0% interest until the person turns 25 years old - is that bs, or does it depend on the bank? I graduated from Uni Dec 08 and am 23...so I'm unsure if I question their methods/oversight, I may lose my 0% interest, even though it looks like I already lost it
This is probably clear-cut, but I'm completely ignorant to the specifics of banking.
Thank you, H/A~!
Timeline:
Sometime in 2004, my first year at uni.
Sometime in 2004, I setup my first (student) bank account - overdraft and credit card.
First time I use the credit card is May 2008 (according to my online statements).
May 08-Jan 09, I use the credit card instead of my check card everyday, and pay off the balance at the end of each month (to build some decent credit).
For the past few months, I haven't been able to completely pay off the balance, but always paid significantly more than the "minimum payment." So after Jan 09 there has been a moderate remaining balance each month.
Up until yesterday, my credit card has never been charged a cent of interest.
So yesterday, I'm charged $11.80 for a "finance charge." I figure that's about .85% interest on what my balance was.
The website (wells fargo) is stating (generically, for all credit cards) that there is 9 months no interest. But May 2008 - April 2009 is more than 10 months...why are they just now charging me interest?
I don't want to call the bank for clarification because I've been told that "Student Bank Accounts" retain the 0% interest until the person turns 25 years old - is that bs, or does it depend on the bank? I graduated from Uni Dec 08 and am 23...so I'm unsure if I question their methods/oversight, I may lose my 0% interest, even though it looks like I already lost it
This is probably clear-cut, but I'm completely ignorant to the specifics of banking.
Thank you, H/A~!
snorepez on
0
Posts
Where are you? Obviously not the US?
Hmm...A month or so ago, I had a payment due. And I was planning on paying it, but there was a charge to my card from some online store that was invalid and that was refunded to my card, which took away the "$x.xx is due by this date" from my online banking. So, $20 was due, but $100 was refunded onto the card, which theoretically paid for that minimum payment.
That could be the only fault I know of...but that was a while ago. Plus I've never gone over my limit, so that can't be it...
Should I call the bank and ask, or is the concept of "0% interest until 25 y.o. with student account" really true in some cases?
When I've carried a balance, the interest showed up as "Finance Charge." I've never been over my limit and never made a late payment.
I'm pretty sure that most companies treat a refund differently from a payment, even though it would usually show up in the same section of a bill (debits, rather than credit charges). So if you didn't make a payment that month, they may have given you a late charge.
Have you heard of the concept, if you have a balance that is more than half of your allowance it merits a penalty/delinquent charge?
My name is Pony, and I used to be a Customer Service Agent and Fraud Investigator for American Express.
While I can't comment on the particulars of some of the potential special offers and provisions that your individual bank may be offering (0% interest for 9 months, etc.) and encourage you to call them to clarify these issues, I can give you some basic information that applies to all credit cards.
Finance Charges = Interest. The terms are interchangeable. Some companies prefer the term Finance Charge, some like calling it Interest, and other companies use both (AmEx uses both). They mean exactly the same thing.
If you are getting charged a Finance Charge, it is because you have been unable to completely pay off the balance in full before the due date (the technical term for this is "revolving a balance"). Even if you make the minimum payment, or even above the minimum payment, if you do not pay the balance in full before the due date you will get charged Interest/Finance Charges, unless you've got some kind of special deal (see below).
While I've never heard of any bank offering "No Interest for X amount of months" on credit cards (it certainly isn't an industry standard), it is entirely possible that this is the nature of the deal you had on your credit card, which may explain why you haven't possibly received any Finance Charges before now. Nonetheless, I would definitely encourage you to go over your credit card statements for the past few months with a fine eye and double-check that this is the first time you have received a Finance Charge.
I'm also going to take a moment to explain how Finance Charges are calculated and applied to your account. This is general information that applies to all credit cards and, with the exception of some kind of special deal that exempts you from interest for a given period of time, it's how it works on your's too.
Every credit card tells you your interest rate as a given percentage. Usually, this percentage is expressed as APR (Annual Percentage Rate).
Let's say, for example, your credit card says you have an APR of 14.5% (common for starting credit cards)
This does not mean you are charged 14.5% of your balance as interest each month (that would be insane!)
What the APR represents is how to calculate your DPR (Daily Percentage Rate). Your DPR is an accurate indicator of how much interest you will actually get charged.
To figure out your DPR, you divide your APR (14.5%, for example) by the number of days in your credit card's payment cycle. Your payment cycle is the number of days between your statement issue cut-off date (the day they print and send you a statement) and your statement due date (when they expect their money by).
For most, but not all, credit cards the payment cycle is 21 days. So, using the example of 14.5% and a payment cycle of 21 days, you would have a DPR of approximately 0.69%
When your interest is calculated by your credit card company, they take the previous months balance per day of the payment cycle and multiply it by your DPR. They then add up this incremental daily interest amount and express it as a complete value, and this is the interest they actually charge you on your statement.
Sound confusing? It can be. More importantly, it makes calculating the actual amount of interest you are getting charged to make sure it is accurate a massive pain in the ass.
Here's the part that gets even more confusing: Once you start revolving a balance (not paying your credit card in full before the due date) not only are you going to get an interest charge on that statement, even if you pay it in full before the next due date you are still going to get charged what is called a Residual Finance Charge.
Because interest is technically counted every single day that you are revolving a balance, it is being counted even after they cut a statement and send it to you. If you pay the balance in full after a due date, you are still going to get charged the DPR multiplied by balance that existed for the number of days in-between the due date and the day the company received the payment of the account in full (which is not, necessarily, the same day you made the payment).
So even when you finish paying off the balance in full, if you had revolved that balance for months previously, you are going to see a final interest charge on the statement after you pay the balance in full.
What I'm trying to impress upon you here is that interest and credit cards are in fact extremely complicated and difficult to figure out and if you don't understand how or why you are getting charged what you are getting charged, you should call your credit card company for more information.
Hope this is helpful!
I blame being tired and skipping a step.
To calculate your DPR, you actually divide your APR by 12 to figure out your MPR (Monthly Percentage Rate) and divide that by the number of days in your payment cycle (typically, but not always, 21), and there's your DPR.
Some people, including some credit card customer service agents, will simply tell you to divide your APR by 12 and poof, that's how you calculate interest.
This is inaccurate, and will always produce results that are off by anywhere from a couple of cents to a couple hundred dollars, depending on how your transactions over the month broke down.
Trust me, the number of calls I had to deal with where people didn't calculate their interest properly and assumed they were getting overcharged...
It's complicated.
there are about 21 business days in a month.
PSN: TheScrublet
I concur - this should be required reading in every credit/budget/finance thread ever. Very informative.
(Maybe with a TL;DR of: Don't ever carry a balance unless you absolutely cannot afford to pay the entire amount - i.e. doing so would mean starving/freezing/et cetera).
Regarding the OP, when you get a credit to your account, it's a different "color" of money. It lowers your balance, but does not count as a payment in any sense (as far as I know).
I'll be paying off this balance soon.