How does CC finance charges work?

iVillage Member
Registered: 06-16-2004
How does CC finance charges work?
4
Wed, 03-09-2005 - 10:57am

I paid off 2 credit cards this past month, and when I got the new statements they are charing nothing else but interest. I thought that when an acount was paid off in full there was interest because they gave you a grace period? Is this only for new charges?

One of the cards due to the date the payment was due, I had to make a minumum payment and then I paid off the balance before the next statement ran (2 days later), I figured they would charge me interest, but not the one that was paid off a few days before the due date. I paid off the balance as of the statement and included the new activity (auto pays) so techically I paid more than what was billed.

I am so confused.
Nicola

Photobucket - Video and Image Hosting&

Avatar for cl_phocid
iVillage Member
Registered: 03-26-2003
Wed, 03-09-2005 - 11:56am

hi Nicola,


The only time there is a grace period is when you pay your card in full each month.

All my best,
Danni

iVillage Member
Registered: 02-19-2004
Wed, 03-09-2005 - 12:38pm

The last credit card I paid off I expected (and did) see some interest billed in the next cycle. That is because I had the balance the whole previous month (and months before that), and interest is usually calculated on the average daily balance. So let's say you have a $3,000 balance (not a new charge, but something you've had on a card for a while), and say your billing cycle starts on the 1st of the month, payment due on the 30th, and you pay your bill 2 days before the due date on the 28th. Your average daily balance was $2,800, and they will apply your interest rate to that amount.

Some cards give you a grace period the first cycle you make the charge. So if you have no balance on the card and charge $300 in February, you won't see interest until your March statement. But you will see interest on every statement from March on, based on whatever the average daily balance is in each statement cycle.

Photobucket

iVillage Member
Registered: 06-16-2004
Wed, 03-09-2005 - 2:08pm

That really stinks!

I had DH call CapitalOne and they said the same thing as Danni. Of course my husband got irratated with them and told them he will be taking his business elsewhere!

Oh well at least it is only $50 combined for these 2 cards.

Thanks for the help!
Nicola

Photobucket - Video and Image Hosting&

iVillage Member
Registered: 02-19-2004
Wed, 03-09-2005 - 2:26pm
He can take his business elsewhere, but they all do that. It's the cost of using credit cards (and not paying them off each month). If the credit cards didn't make money at what they do, they wouldn't be in business (used for the right reasons, credit cards are good). If you find yourself in a bind and need them, *expect* to have to pay for the privilege. If you have your finances in order so that you don't *need* credit cards, then you will be in good shape no matter who your cards are with (you'll be eligible for better rates and have more options).

Photobucket