Credit Card Issuers Do Some Sneaky Stuff, But This is One of the Sneakiest

Two months ago, I accidentally shorted my payment to pay my balance in full by a $1.19, which I found out last month, when I was charged interest of over $4.00.

Logically, from a consumer's standpoint, the interest should have been around $0.17, but I know the credit cards use a full amount balance to calculate interest, so I wasn't surprised.  Nevertheless, I thought adding $5.00 to the full balance on the current bill would resolve any interest that would have accumulated since the bill was sent.

I was wrong.  The new bill, which I received this week had $1 and some change as interest.  The extra $5 went towards new purchases.  I called the credit card issuer, and asked why the $5 wasn't credited to the accumulated interest, and was credited to new purchases.

The rep replied that the total due on the bill is only an estimate, and not the pay off on that actual date.  To get rid of the interest being calculated, I would have to pay off the total amount, including interest, on that specific day.

This I knew, but I had forgotten.  With your monthly payment, the credit card will pay off your most recent purchase first, then work backwards.  Logically, this wouldn't make sense either, since you get a 30 day grace period of regular purchases.  HOWEVER, it seems that grace period is taken away once you start carrying a balance. 

So, my problem was that I used the credit card after new bill was sent, but before my payment posted, so  the extra payment went to the new purchase (although I hadn't received the bill for it, yet), and not to any accumulated interest.

The problem with this is that if you use the credit card regularly and frequently, you will never get rid of the interest payment because you'll be accumulating interest from the day you make the purchase.  

The only way to get the interest to $0 is to call the issuer and ask what the total payoff amount is for that day. 

Which is what I did.  

So, this is another reason to pay off the card in full each month.  And even if you do, double check to make sure you are not even a penny off.  My $1 shortage turned into over $6.00 in interest over 2 months. If I could only get that sort of return in my investments.

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