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Discover has discovered a loophole in the new credit card law

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Discover has discovered a loophole in the new credit card law

Fact 1.  I have always paid Discover before the statement drops.

Fact 2.  In March, I opted for a Balance Transfer of 0% for one year amt. $4,700).

Fact 3  In April, I received a statement that included the $4,700 BT with a minimum payment of $137.

Fact 4  During April, before the payment due date, I charged $828 in regular charges.

Fact 5  Before the due date for the April statement, I paid $1,000 (enough to pay all the regular charges plus the minimum payment for the BT.

Fact 6  The May statement reflected the BT, the regular charges and the $1,000 payment.  There were NO additional interest charges.

Fact 6  During May, I made one regular charge of $88.00.

Fact 7  My June statement just arrived.  There are two interest charges posted.  One for $0.44 and one for $0.06 for a total of$0,50

Fact 8  The regular charge of $88 was posted on May 21 and paid on June 1 (10 days). 

Fact 9  The $88 charge was included in a payment of $250.  More than adequate to pay the BT min. Payment plus the new charge.

Fact 9  The $88 charge was not granted the minimum 25 day grace period before accruing interest charges.

 

A call to Discover provided the answer. 

 

Since there is no verbiage in the new credit card law to prohibit it, Discover will not allow 25 day grace period for new purchases on accounts that carry a Balance Transfer, even though the minimum balance transfer payment is made and new charges are paid within the same cycle they were posted.

 

What this means of course, is that now I have to sock drawer the Discover card until the BT is paid or suffer additional interest charges on purchases even though they are paid within the same cycle they were posted.

 

I have read and re-read their new cardholder agreement that was mailed in February, 2010 but can not find this mentioned anywhere.

 

Would you, my good friends here at FICO Forums, please look at your new credit card agreement and see if you can figure how this is being justified by Discover?

 

Thanks in advance for the eyes.

 

IMA


Starting Score: TU 737 EQ 721
Current Score: TU 741 EQ 741
Goal Score: TU 765 EQ 760


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Message 1 of 4
3 REPLIES 3
New Contributor

Re: Discover has discovered a loophole in the new credit card law

Decoding the verbiage used by Discover can result in a migraine!   However, after reading my credit card statement and notifications regarding the grace period, it seems that they have included this statement:  "There is no grace period on balance transfers or cash advances.  We generally apply payments to your account based on the Annual Percentage Rate applicable to the balance of each transaction category.   This means if you do not pay the NEW BALANCE on the current billing statement before the payment due date, then, depending on the amount of your payment and the APR rates on other balances, you may not get a grace period on new purchases.

 

Because you did not pay the NEW BALANCE on the current billing statement, to include all new charges and the total remaining amount of the balance transfer as noted on the current statement,  no grace period was given on your new purchases.   Having made only the minimum payment on the remainder of your balance transfer seems to be the trigger regarding assessment of finance charges.

 

Sock drawer the Discover until the full balance transfer is paid within any current billing statement before making any new purchases.  

 

Hope that makes sense!



Starting Score: 696
Current Score: TU 731 7/30/10 EQ 789 8/23/10
Goal Score: 800


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Message 2 of 4
Established Contributor

Re: Discover has discovered a loophole in the new credit card law

It's not just Discover, it's all issuers, and it's a "loophole" that would be there regardless of the CCARD Act. It is caused by having any balance (usually a BT) carried from month-to-month. Whenever the total balance is not paid in full, any new charges lose their grace period for interest, and there will always be some minor amount of interest accrued even if you pay well above the minimum. Most people pay 2-3 weeks after the statement closes, and purchase balance interest during that period is accrued and posts on the following statement. Even if you paid in full the day after the statement closes, you would still accrue one day's interest.

 

Smart consumers need to avoid carrying multiple-APR balances on the same account (just as they did before the CCARD Act) or accept that they will be paying some high-APR interest on the purchases unless they minimize that by scheduling a sufficient above-minimum payment to post immediately after the statement closes, which means they are paying much earlier than they normally do. The only alternative I know of is the Chase account with the Blueprint feature where you can separate purchases and BTs and protect purchases from interest if PIF.

Message 3 of 4
Established Contributor

Re: Discover has discovered a loophole in the new credit card law

Thank you Kittygal and Revike; I do understand.

 

As Revike suggested, I have sock drawered the Discover until the BT is paid.

 

I wish I had read the CC agreement more carefully before agreeing to the BT offer because of the cash back bonuses I'll be missing out on.

 

OK, no more grousing.  Thanks again to you both for a clear and concise response.

 

IMA


Starting Score: TU 737 EQ 721
Current Score: TU 741 EQ 741
Goal Score: TU 765 EQ 760


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