Help me understand Macys billing.

[nursepower]

Twice ive carried a balance and then PIF. The first time i paid in full and a few days later have another $2 due. This time i paid $400 in full and i now owe $8 more dollars. I paid it but what am i missing. I pay in full..yet they bill me something after paying my full balance.

[Anonymous]

interest maybe? i would chat with a CSR and see whats going on..

[tcbofade]

Sounds like interest to me.

For example:   You start a year with a zero balance, charge $200 in January, PIF when the bill arrives, next bill will be zero as you expect.

However, if you make the minimum payment (or any payment less than pif), the balance that you carry over starts to charge interest IMMEDIATELY, there is no more grace period.

So, if you charge $200 in January, and pay $100, you carry a balance of $100 into the next month.   When you pay THAT bill in full, you will still owe interest on the $100 you carried from the date of your last statement to the date that you PIF'd.

Clear as mud?  Hope that helps! 

[Anonymous]

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@tcbofade wrote:

Sounds like interest to me.

For example:   You start a year with a zero balance, charge $200 in January, PIF when the bill arrives, next bill will be zero as you expect.

However, if you make the minimum payment (or any payment less than pif), the balance that you carry over starts to charge interest IMMEDIATELY, there is no more grace period.

So, if you charge $200 in January, and pay $100, you carry a balance of $100 into the next month.   When you pay THAT bill in full, you will still owe interest on the $100 you carried from the date of your last statement to the date that you PIF'd.

Clear as mud?  Hope that helps! 

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+1

It is called residual, or trailing interest in less formal contexts. The concept was described well above. You only get one 20 something day interest free grace period with CCs. If you PIF every month, due to the grace period, you will never have any interest charges for non cash advances. However, if you carry a balance and suddenly PIF, any interest that accrues each day for the prior balances will still accrue interest charges. Simply put, if you PIF after carrying an interest balance in the past, you will generally have one more interest payment to pay the next month because your PIF of the outstanding balance does not factor interest on the existing balances from the prior statement cut date. 

Very few customers realize how residual interest works and many are surprised when informed about it. Some issuers will waive it once per customer, but most won't waive it after the first time (some will never waive it). Residual interest is permitted per the terms and conditions of most card agreements and it is very common. Think of it this way, cards accrue interest on a daily basis and the only grace period for payment is on the new balances. 

[nursepower]

How come they don't include the interest in the current balance? 

[Anonymous]

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@nursepower wrote:

How come they don't include the interest in the current balance? 

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Including interest in the current balance would require them to update interest everyday. Your current balance only includes your previous statement balance and new charges. Your new charges do not accrue interest but unless you pay on the date your statement cuts, your old balances will accrue interest each day till the day you PIF. In the past the reason it was done this way was that there was no online access and the technology to update interest each day was not practical to implement. While it can be implemented today, no lender has done this yet for CCs. For other types of loans, like student loans, you can sometimes see your current payoff online which includes residual interest. However, most of them have a disclaimer stating that the payoff might be incorrect and additional interest payments might be needed. No CC lender has such a payoff option yet as far as I know. 

Anyway, to answer your question, I don't know why they don't include interest. In the past, technology was likely a limitation. Now it is probably just them doing what they have always done. It might have something to do with keeping mail and online systems synchronized. Since people who pay by mail still rely on statement balances that don't change from day to day, the online system likely does the same. With that said, they could likely add a third field (something like payoff) that includes the interest accrued after the statement date, but they don't currently do it. Should they? I can't think of a reason why not, but CC companies often don't do things that could make our lives easier.

For your purposes, it is important to know that residual interest is legal, it is common practice, and some lenders occasionally waive it once for customers who complain because explaining it is sometimes more of a hassle than just waiving the fee. 

[takeshi74]

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@nursepower wrote:
Help me understand Macys billing.

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It's not specific to Macy's.  Any credit card is subject to residual interest.  If you want to avoid it then you need to PIF every month and not have any balance that immediately accrues interest such as chas advances, balance transfers, cash equivalents, etc.

[icebox702]

this happened to DH and they explained it to him just the way it was explained above.  one thing is for sure...the card will remain the sock drawer! 

[Anonymous]

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@Anonymous wrote:

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@nursepower wrote:

How come they don't include the interest in the current balance? 

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Including interest in the current balance would require them to update interest everyday. Your current balance only includes your previous statement balance and new charges. Your new charges do not accrue interest but unless you pay on the date your statement cuts, your old balances will accrue interest each day till the day you PIF. In the past the reason it was done this way was that there was no online access and the technology to update interest each day was not practical to implement. While it can be implemented today, no lender has done this yet for CCs. For other types of loans, like student loans, you can sometimes see your current payoff online which includes residual interest. However, most of them have a disclaimer stating that the payoff might be incorrect and additional interest payments might be needed. No CC lender has such a payoff option yet as far as I know. 

Anyway, to answer your question, I don't know why they don't include interest. In the past, technology was likely a limitation. Now it is probably just them doing what they have always done. It might have something to do with keeping mail and online systems synchronized. Since people who pay by mail still rely on statement balances that don't change from day to day, the online system likely does the same. With that said, they could likely add a third field (something like payoff) that includes the interest accrued after the statement date, but they don't currently do it. Should they? I can't think of a reason why not, but CC companies often don't do things that could make our lives easier.

For your purposes, it is important to know that residual interest is legal, it is common practice, and some lenders occasionally waive it once for customers who complain because explaining it is sometimes more of a hassle than just waiving the fee. 

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+1. We've got some smart people on this forum.