This is totally new to me although I have this business credit card from bank of america for about 2 years now. My understanding of how credit card works was:
If I buy anything on my credit card, I will be mailed credit card statement with a due date on it. If I pay the whole balance of my purchases before due date, I won't be charged any interest charges. I do have option of paying the minimum payment, which If I do, Then the interest charges will start accumlating on remaing balance.
However much to my surprise and I am pulling my hairs out to understand this:
I had about 5k balance that I carried over from my last statement. Then I made purchase of another 15k. Now when the statement arrived, it shows the interest charges on whole 20k , even before the due date. That is close to $475 of interest charges. I called the bank to clarify and telling them I expected to had interest charges on 5k only on this statement and there should not be any interest charges on 15k charges that I made. My understanding is there should be no interest charges on 15k charges until after due date if I dont make payment in full.
But Bank of america is responding telling me that there is no interest free period and interest charges are calculated on purchases from very next day of purchases. I even went to branch and they don't understand a thing and just put me on phone with card services with no help at all.
This goes totally opposite to my understanding of how credit card works. Maybe someone with more knowledge can shed a light on it. Because how they are explaining is, that is how line of credit works and not credit cards. On all credit cards there is grace period to make payment and no interest is charged if I make payment before that due date.
I don't have any other credit card beside bank of america, So can't compare to understand the problem. However I went to my online banking and look at my other past statements. The times when I don't carry any balance from previous statement and make any amount of purchases , then the statement has familiar calculation of how credit card works and there is no interest charges until due date. However If there is period when I am carrying over a balance, lets say even $100 from previous statement and now make purchase of lets say 10k. So now when the statement arrives, it does not show interest charges for $100 balance from previous statement, but interest charges for whole $10,100 amount. So lets say you made purchase of $10000 a day before statement closing date, the very next day you are hit with little over 1.75% fee ( 22.50% APR ) just for using the credit card.
I don't think I am missing anything here...I want to hear out what you guys think as I don't think things are right here.
If they use the average daily balance (including new purchases) method, I can see where interest would be charged as you describe if you carried a balance over (this is the AMEX method and likely everyone else’s, called “trailing interest”). The including new purchases part is important, the the trigger is carrying the balance over.
Again, read your card agreement. If you don’t have it, ask for one.
I've never carried a balance on either of my BoA business cards; however I do have a BoA Line of Credit I have used. The Business Advantage Credit Line uses the term balance subject to interest rate to calculate interest due and I suspect the credit card works the same way. I am not sure the wording average daily balance subject to interesst is correct, but I think it we all understand what is meant.
One of the things that rings in my ear after reading your post that I kind of blew off at the time is my business rep at BoA told me, "if you ever need to carry a balance, no matter how small, move it to your line of credit on the due date of the credit card, never carry it on your card." I thought she was treating me like a kid because the LoC rate is much much lower rate than the card, but now I think she was actually being helpful.
"Average Daily Balance"
Sounds like you made the large $15k purchase close to the beginning of the statement month so it may be close to the entire month that you paid the $20k.
Should list on your statement what balance was calculated to = your interest charge, I would assume looking at that it will be just shy of the actual entire balance because of a couple days between statement and charge and also your payment from the previous month.