I'm not sure how to clearly explain this, so I'll just describe what happened instead.
My Pay Over Time limit is $4,000. My previous statement balance was $2,700. I paid it in full. During the next billing cycle, I charged $3,600 to the card. I'm approaching my Pay Over Time limit and noticed that there were two products I wanted to buy totalling about $3,000. I wanted to set them up via Pay Over Time. So I paid the $3,600 and once my balance showed $0, about a week later I then charged $3,000 and set both items up on Plan it. This was all in the same billing cycle (you see where this is going?). I made no more payments and waited until the statement cut. So far, so good right?
No. I got two emails congratulating me this morning for paying my two Plans off. They took the $3,600 that I paid a week prior and applied it to the two new Plans I set up first. Then sent me my bill showing that I owe $3,000 in full by my due date. It's not just any payment you make over your amount due after you set up a Plan. It's any payment you make over the amount due for the entire billing cycle regardless of when a Plan is set up. If I had realized this, I would have waited until the statement cut and then charged the two new items and set up Plans for then after.
Ultimately, it was my fault. The same exact thing happened to another person I know and now they owe $6,000 in full which they originally thought was set up as a plan. The warning about this wasn't exactly clear, in my opinion, but maybe I could have just misunderstood. Just thought that others should be aware if you have a tendency to pay down balances right after you charge them. I have the funds to pay it, but I would have rather spread it out over 12 months.
@TheRedHat wrote:Just thought that others should be aware if you have a tendency to pay down balances right after you charge them.
Nope... I always let the statement cut and then make the payment. I actually read a few months back prior to opening my AMEX that multiple payments every month isn't necessary... PIF by the due date will suffice to keep AMEX happy.
I see your point though... but as far as Plan It... never used it. I've heard not so good stories about it... including yours.
@Creditaddict wrote:Pay over time on the charge card? I thought basically any charge over $500 can be revolved if you are under your revolving limit... anything above your revolving limit plus charges under $500 will be due in full.
You don't have to actually specify you want something to revolve... just shows you 2 amounts due.
am I missing something?
Yeah, you should be able to choose the adjusted balance, but sometimes it doesn't allow it. In my case, I've never had the option.
@Creditaddict wrote:Pay over time on the charge card? I thought basically any charge over $500 can be revolved if you are under your revolving limit... anything above your revolving limit plus charges under $500 will be due in full.
You don't have to actually specify you want something to revolve... just shows you 2 amounts due.
am I missing something?
You can choose any charge you make to the card that is over $100 and put it on a payment plan if you can not or did not want to pay it in full after the statement cuts. It can be set anywhere from I believe 3-24 months depending on the amount of the charge and your credit worthiness. For me, personally, it's like taking a loan at a fixed 9-10 percent interest rate without having to take a hard inquiry, up to your set Pay Over Time limit. One of the items I charged was a very high end office chair replacement (the old one was literally falling apart and causing back problems). So instead of asking for a loan, I'd just charge it to the card and pay it over a year. That was the idea anyway. -_-
@Dadof31978 wrote:has to do with the CARD Act of 2009.
From my understanding of the timeline of charges, payments, and statement dates in OP's post, this is correct. Because Plan It has a fee structure, Amex applied payments as they are required by federal law.
@K-in-Boston wrote:
@Dadof31978 wrote:has to do with the CARD Act of 2009.
From my understanding of the timeline of charges, payments, and statement dates in OP's post, this is correct. Because Plan It has a fee structure, Amex applied payments as they are required by federal law.
I take it you're referring to: "Credit card companies must apply payment amounts "in excess of the minimum payment amount" to a consumer's highest interest rate balances first." In this case since it is a charge card, the interest rate would effectively be zero. Thus, the payment plan on the "Plan It" feature would have the highest interest and all payments are required to settle that first. Correct? (I just looked it up.)
Yes, mostly correct. There is an APR assigned to your charge card (for POT balances, and accrued interest if you made a payment lower than the required amount - but don't do that) however from how I read the timeline your POT purchases were not yet subject to interest at the time of your statement closing.
The order of things can get really complicated when you are dealing with purchases, POT, Plan It, and fees and how those change before and after a statement has closed. I made a similar mistake about maybe 10 years ago. Got a bonus and decided to pay down my new purchases on a charge card that had a massive POT balance so the bill wouldn't be as big - was quite surprised and shocked when I found out they had applied to my POT balance and I still owed those thousands I had just paid... in 25 days.