Interest Charge Calculation

[N860CR]

I have never paid a cent of interest in my life so I have no idea if this is normal or not... but I thought I'd pass it on incase it is some Citi specific thing that is designed to catch people out.

My Citi Signature statement managed to "go missing" somehow so I overlooked paying it for the last month. It was due on 2nd Oct and was only about $380. Since that statement, I'd purchased Avianca points on it so racked up a pretty high pending bill (about $8k) that wasn't going to be due until early November.

I logged in today and saw a missed payment fee of $10, interest of about $15 and then "interest in advance" for about $200.

I called Citi and, while they quickly waived all the fees, they said that "the system sees that you haven't paid the last month, so it also charges interest in advance for the unbilled amounts. So basically, even though the payment wouldn't have been due until November, they bang on the interest instantly.

As I said, I have no idea if this is normal or not, but it seems a bit dishonest and designed to catch people out.

 

[knasty]

that is normal. as soon as you miss a payment you accrue interest in that statement's charges from their date of posting plus all others until you have paid the total balance in full. but as you say Citi are pretty lenient with these things if a genuine mistake.

 

[ithongy]

I have noticed since I spoke to bank to get my annual fees halved mysterious interest charges has been coming up on my account for 2 months. Had to deal with it in branch to get interest reversed. Also another tricky thing is when statement has been issued and then you refund an item say for eg $1k and it gets credited back into your CC limit then pay remaining balance. You may still be stung with interest as some banks don't see a refund as payment for the statement.

 

[N860CR]

I can see how people get into trouble with credit cards!

 

[opusman]

You can think of it as if the "interest free period" is a favour they extend to you as long as you pay on time. As soon as you don't, interest is charged on everything, back-dated to the time of the first transaction, and it normally requires payment in full of the outstanding balance in order to put things back to normal. Not citi specific, this is standard for all credit cards.

 

[trippin_the_rift]

Most cards will require 2 months of paying the full balance by the due date in order to reset the interest free period. Missing payment by $1 will mean you're hit with interest on the full amount of any transaction unpaid which could mean you're paying interest on transactions from 2 months prior plus the next 2 months...even if you pay every other balance in full and on time. This is worst case scanrios based on your cycle but it's not somethings u ever want to get into..

 

[N860CR]

It's all very interesting. As I said, never paid a cent of interest in my life, but I can see how hard it must be for people who actually use their cards for long term credit. Seems very unreasonable for the banks to be screwing people so much.

 

[opusman]

As I said, never paid a cent of interest in my life, but I can see how hard it must be for people who actually use their cards for long term credit. Seems very unreasonable for the banks to be screwing people so much.

Well it's only an "issue" the first month that you don't repay in full. Once you're into the cycle of paying interest on credit cards then it's just a regular interest bill every month, and presumably you get used to it

 

[opusman]

Most cards will require 2 months of paying the full balance by the due date in order to reset the interest free period. Missing payment by $1 will mean you're hit with interest on the full amount of any transaction unpaid which could mean you're paying interest on transactions from 2 months prior plus the next 2 months...even if you pay every other balance in full and on time. This is worst case scanrios based on your cycle but it's not somethings u ever want to get into..

I'm not sure it's a clear cut "2 months" rule, I think this just usually happens because people repay the full amount shown on the statement and think "ok I've cleared the debt", but they forget the interest that's accrued since the statement was issued. If you call the bank to get a full repayment amount, or just work it out yourself and pay extra to cover the additional interest you would be able to reset the interest free period immediately.