Secured Card Charge Off

[Anonymous]

My husband had a secured card ($300) that was charged off a few years ago. When he paid it off he paid well over the balance on the card (because of the late fees) but it doesn't appear that the $300 put up to secure the card in the first place was taken into account in figuring what he owed. It was paid a long time ago, so I'm mainly just curious here - but is there anything in the credit card agreement that forfeits the money on a secured card if the card is defaulted?

[laz98]

disclaimer:  i have never had a secured card, so i'm not an expert! 

i would guess that if you went bad on your account, they would take the money.  i can't imagine why they would give it back to you (or anyone).  seems like they would be shooting themselves in the foot, you know?

[Anonymous]

But I mean, in theory if you charged $300 worth of stuff and then stopped making payments, you've really already paid for that $300 worth of stuff. They can't come after you and say you owe us $300 for the stuff you've just charged. You've already paid the $300 when you secured the card, right?

So hubby went overdue and charged off, so of course there were late fees, etc. Ultimately the bank came after him for $530, which he paid in full. But if he owed $530 on the card, when he paid it off on a closed account shouldn't it have been $530 minus $300 already given to the bank to secure the card?

[laz98]

i see what your thinking is, & that's actually what i was thinking at first.  but the $300 isn't a credit on the account, it's the limit on the account.  it's not like overpaying your account by $300.  you gave them $300 so that you could spend up to $300.  so technically, yes, you still owe them the $300.  at least that's how i see it. 

[Anonymous]

No... There was $300 sent, which should have gone into a separate account. He charged up a total of $530. He then sent them the full $530. So there should still be $300 sitting in the original account. If they had applied the $300 security deposit to his balance, he should have had to pay only $230 additional. Because he paid the entire amount of $530, he should be refunded the proceeds of the security account, plus interest if it was an interest bearing account (some are, some aren't - I've had both kinds.)

I had a secured credit card through Wells Fargo for $300 also. They were supposed to take the payments automatically from my checking account, as I had arranged with them when I opened the account. When the first payment did not come out of my account, and they charged me a late fee, I told them to close my account. (naive, I know - I was only 22!) I paid the full balance due. A couple weeks later, I received a check from them for the original deposit plus a few cents earned interest.

If I'm understanding the question correctly then I believe your husband is owed $300 from the credit card company. Is it possible that he already got it? If it was a long time ago, maybe he forgot. I have done that before.

Or maybe the total after late fees, accumulated interest etc. was $830 and the $300 WAS credited toward the balance. Charged off credit cards can snowball surprisingly quickly!

[Anonymous]

Thanks for sharing your experience Sommery. That's what I thought should have happened - although I just assumed it would have been applied against the debt owed. The charge off was 3 years ago, and I personally mailed the check (this, amongst other things, prompted me to take over DH's finances while we were still dating) so I know positively that we never received anything back. He asked me why he had to pay so much at the time when he'd already given them $300 in the first place - I just blew off the question though, since he was drowning in so many collections at the time and this was the least of his worries.

The charge off was actually sent to Progressive Management Systems for collection. Luckily we paid it before that ever hit his credit report, so just BOA shows with regard to this account, but I wonder if maybe they'd written off the loss already, and so of course kept the $300, and then it never got resolved after PMS collected? And you're right, fees snowball disgustingly quickly. I suppose it's possible that his debt tripled over the course of less than a year.

[Anonymous]

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@Anonymous wrote:

Thanks for sharing your experience Sommery. That's what I thought should have happened - although I just assumed it would have been applied against the debt owed. The charge off was 3 years ago, and I personally mailed the check (this, amongst other things, prompted me to take over DH's finances while we were still dating) so I know positively that we never received anything back. He asked me why he had to pay so much at the time when he'd already given them $300 in the first place - I just blew off the question though, since he was drowning in so many collections at the time and this was the least of his worries.

The charge off was actually sent to Progressive Management Systems for collection. Luckily we paid it before that ever hit his credit report, so just BOA shows with regard to this account, but I wonder if maybe they'd written off the loss already, and so of course kept the $300, and then it never got resolved after PMS collected? And you're right, fees snowball disgustingly quickly. I suppose it's possible that his debt tripled over the course of less than a year.

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You'd have to check the terms of the credit card agreement, but generally you should get back your guaranty deposit.  Two possibilities that I see right now are that either:

1.  The amount your DH paid to solve the problem was actually the amount calculated after they deducted his initial guaranty of $300; or

2.  There was an escheat to the state for the $300 and it is sitting in your state's unclaimed property fund waiting for you to claim it.