Am I wrong or is Cap One wrong?

[dapps06]

One of my Quicksilver accounts with Cap One has a statement cut date of the 13th. On 12/13 my statement cut with a balance of around $1800, so naturally I was charged interest. I transferred the full balance to another card, this transfer was complete on 12/29 at which point the account had a zero balance. My statement cuts yesterday and it's showing around 16 bucks in interest. I called and was told the interest charge came from carrying a balance until the 29th, about half way through the cycle.

It's my understanding that you only pay interest on balances remaining when your statement cuts, if you have a zero balance, which I did, then you dont' pay interest. I asked the rep why anyone would use credit cards at all if they were going to be charged interest on every purchase regardless of when they paid for those purchases. He put me on hold and came back to tell me that I would receive an account credit in the next day or two to cover the interest added on.

I'm very annoyed that this card will be reporting with a balance now. After he agreed to issue an account credit, I again asked how this was possible considering the account had a zero balance. He again went into an explanation that implied this account credit was more of a favor, and that Cap One didn't make a mistake. What am I missing here?

[Anonymous]

It's pretty simple. It's called residual interest, and it happens when you've previously been carrying a balance on a card (or did a cash advance during that cycle) and then paid the card in full after the statement cut. The interest is from the statement cut date until the date it was paid in full (i.e., 13th to 29th). If your charges were all new in a given month and you hadn't been carring a balance from before, then you can pay the full statement balance by the due date without any interest charges.

You are very lucky they gave you a credit. They didn't have to and won't again.

G

[dapps06]

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@Anonymous wrote:

It's pretty simple. It's called residual interest, and it happens when you've previously been carrying a balance on a card (or did a cash advance during that cycle) and then paid the card in full after the statement cut. The interest is from the statement cut date until the date it was paid in full (i.e., 13th to 29th). If your charges were all new in a given month and you hadn't been carring a balance from before, then you can pay the full statement balance by the due date without any interest charges.

You are very lucky they gave you a credit. They didn't have to and won't again.

G

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Hmm, I never knew this. I'm surprised they didn't put up much of a fight, or any fight for that matter. It was a quick and simple call, they offered a credit almost immediately, that led me to believe they knew they were wrong.

Good to know, thanks for the reply.

[Anonymous]

No worries! Most lenders will give people one freebie when it comes to this stuff as it's not unusual for people not to realize how interest works. I had to explain it to people dozens of times as a bank employee. Unfortunately the bank I worked for was not as generous as most, but for amounts below my personal discretionary fee reversal limit (about $24 while I was still front line) I always did it. We then put notes on the info system so that if it happens again we will see the note and not give out any subsequent refunds for the same thing.

G

[SunriseEarth]

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@Anonymous wrote:

It's pretty simple. It's called residual interest, and it happens when you've previously been carrying a balance on a card (or did a cash advance during that cycle) and then paid the card in full after the statement cut. The interest is from the statement cut date until the date it was paid in full (i.e., 13th to 29th). If your charges were all new in a given month and you hadn't been carring a balance from before, then you can pay the full statement balance by the due date without any interest charges.

You are very lucky they gave you a credit. They didn't have to and won't again.

G

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Great explanation!   this frequenly happens when you carried a balance and switch to a PIF mode of spending.  It typically takes an extra billing cycle to clear interest.  I also did this with Cap One and had $2 of residual interest.   It's a good reason to PIF (or only use promotional financing, if you need to carry a balance)

[Chris679]

What happened here is that they are calculating interest based on average daily balance.  When you did not PIF that last statement you lose your grace period going forward and that balance as well as any new purchases will be subject to interest charges.  You transferred the balance halfway through but you still get hit for all of those days where you had a balance, it makes no difference what the closing balance is.  Read your cardmember agreement because you often have to PIF two consecutive statements to reinstate the grace period.  

No doubt that Cap One was correct here but like the other poster said they will often throw you a bone and refund a small amount of interest now and again to keep a customer happy.  Most people don't know about losing the grace period so they are under the false assumtion that they will just be paying for the unpaid balance from the last statement.  I think this is the sneakiest way they get your money. 

[Anonymous]

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@Chris679 wrote:

What happened here is that they are calculating interest based on average daily balance.  When you did not PIF that last statement you lose your grace period going forward and that balance as well as any new purchases will be subject to interest charges.  You transferred the balance halfway through but you still get hit for all of those days where you had a balance, it makes no difference what the closing balance is.  Read your cardmember agreement because you often have to PIF two consecutive statements to reinstate the grace period.  

No doubt that Cap One was correct here but like the other poster said they will often throw you a bone and refund a small amount of interest now and again to keep a customer happy.  Most people don't know about losing the grace period so they are under the false assumtion that they will just be paying for the unpaid balance from the last statement.  I think this is the sneakiest way they get your money. 

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I don't think it really is that sneaky.   It is clearly laid out in the T&C and disclosures.  Now most people don't read them in detail, but that's not really the bank's issue.   Basically the grace period when you PIF is a key benefit (up to nearly two months float with the right timing).   When you don't, things go to the "standard" interest model, of average daily balance x days before PIF.

I remember with my first mortgage complaining that the first several years payments are mainly servicing the interest, then it was explained that that really makes sense!

[takeshi74]

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@dapps06 wrote:

On 12/13 my statement cut with a balance of around $1800, so naturally I was charged interest.

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Balance amount doesn't mean that one "naturally" incurs interest.  If the balance was from a cash advance then it would immediately accrue interest.  If you were carrying a balance you may not be subject to a grace period and may incur interest.  However, the amount of the balance on its own does not determine that.

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@dapps06 wrote:

It's my understanding that you only pay interest on balances remaining when your statement cuts

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That is incorrect.  Most use average daily balance.  If the statement balance is subject to a grace period you can pay the statement balance and not incur interest.

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@Anonymous wrote:

I don't think it really is that sneaky.

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+1 It's up to the individual to read and understand the T&C's.

[kdm31091]

It's not really sneaky at all, it's how the majority of cards work. This is why you have to read your T&C and fine print. I don't want to sound insensitive, it's just that people are quick to slam the banks and say that it was unfair or sneaky, when really, you have to read about the product you are recieving.

OP, Glad they refunded you but certainly it was a courtesy nothing they had to do.

[Blodreina]

Some elaboration (and diagrams!)

Grace periods